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AOTC tax question
Old 05-14-2018, 10:32 PM   #1
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AOTC tax question

My 23 year old son probably earned more than $4,050 this year at his job from January through April. He plans to be a half time college student starting this summer. I intend to pay for his college expenses.

It appears that he does not qualify as my dependent, because he fails the "full time student" test to be a qualifying child, and fails the gross income test to be a qualifying relative.

Regarding the AOTC, he does meet the four part test for being an eligible student and will have qualified educational expenses this year.

The question I have is this: Can I pay the first $4K out of pocket for his college costs and then have him claim the credit on his tax return? The IRS site says that "you" have to pay qualifying expenses. If he were my dependent and he paid for it I would be able to treat amounts paid by him as being paid by me. But this is the reverse of that situation.

I could gift him the $4K with the understanding that he use it for those expenses. I know the IRS has the "substance over form" rule or whatever, so they might treat it as me paying for it rather than him.
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Old 05-14-2018, 11:34 PM   #2
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Give him the $4K and let him pay the college. That way he has the record of making the payment. Whether he paid it using gifted or earned money is immaterial.

Now that he is no longer your dependent, the AOTC is his to claim if he qualifies.
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Old 05-14-2018, 11:57 PM   #3
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Thanks!
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Old 05-15-2018, 05:48 AM   #4
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Make sure you include all expenses, like housing, insurance, etc. when determining dependancy.
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Old 05-15-2018, 01:08 PM   #5
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Originally Posted by target2019 View Post
Make sure you include all expenses, like housing, insurance, etc. when determining dependancy.
Right. I definitely will be paying more than half of his expenses this year. Unfortunately, to be a qualifying child, since he is 23, requires him to be a full time student. He won't be.

To be a qualifying dependent, requires him to earn less than $4,050, which I think he has exceeded, but I'll check.
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