American Opportunity Tax Credit

[Caia]

What is meant by “Not have finished the first four years of higher education at the beginning of the tax year.â€

 

My daughter had many DE credits when she graduated from high school and graduated with her bachelors degree in two school years (past high school). So we have used the AOTC credit during three tax years. She was a full time grad student only in 2017.

 

Does she qualify for this credit? She is persuing a degree. She is enrolled at least half time for at least one academic period. She has not claimed the AOTC for more than four tax years. And she does not have a felony.

 

I just don’t quite know what to assume they mean by finished the first four years of higher education. She technically has four years of higher education, but two of them are from high school. Do they count? Or does higher education refer specifically only to the years of education past high school?

 

Thanks for any help you can provide :)

[Nancy in NH]

I was thinking you could at first, but then read some of the examples provided in IRS Pub. 970 and found something that seems to suggest if someone is classified as having completed a four year degree, that student would not be eligible.  I've provided the example that isn't exactly what you are asking, but does state that since the student was considered a second-semester senior they would qualify.  So, I'm assuming it means if that isn't true, then the student doesn't qualify.  I am no expert on education credits for tax purposes, so I could be wrong in my interpretation.  Maybe someone who has experienced this before will chime in.  Here's the example from Pub. 970:

 

"Example 2. After taking classes at College V on a part-time basis for a few years, Shelly became a full-time student for the 2017 spring semester. College V classified Shelly as a second-semester senior (fourth year) for the 2017 spring semester and as a first-semester graduate student (fifth year) for the 2017 fall semester. Because College V didn't classify Shelly as having completed the first 4 years of postsecondary education as of the beginning of 2017, Shelly is an eligible student for tax year 2017. Therefore, the qualified education expenses paid for the 2017 spring semester and the 2017 fall semester are taken into account in figuring the American opportunity credit for 2017."

 

Maybe you can claim the Lifetime Learning Credit?  I just went through a bit of confusion with the LLC for one of my kids, so I feel your pain!  Good luck!

 

Edited February 3, 2018 by Nancy in NH

[Pegasus]

Was she an undergrad in the spring of 2017 and a grad student in fall of 2017?  In that case, I believe that you (the parent) can use all of your 2017 expenses towards the AOTC tax credit.

 

However, if she wasn't an undergrad at all in 2017, then I think SHE (not the parents) is limited to using the Lifetime Learning tax credit or tuition and fees deduction.