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If the taxpayer was under age 24 at the end of the year and certain conditions apply, they may not qualify to receive the refundable portion of the American Opportunity Credit. Below are the instructions from the IRS regarding this including a set of seven questions to help determine whether the three conditions apply. Below the IRS instructions section, you will see information pertaining to the TaxAct® program and the Green Alert that may generate.

Per IRS Instructions for Form 8863 Education Credits (American Opportunity and Lifetime Learning Credits), on page 6:

Line 7

If you were under age 24 at the end of 2020 and the conditions listed below apply to you, you cannot claim any part of the American opportunity credit as a refundable credit on your tax return. Instead, you can claim your allowed credit, figured in Part II, only as a nonrefundable credit to reduce your tax.

You don't qualify for a refundable American opportunity credit if 1 (a, b, or c), 2, and 3 below apply to you.

  1. You were:
    a. Under age 18 at the end of 2020, or
    b. Age 18 at the end of 2020 and your earned income (defined later) was less than one-half of your support (defined later), or
    c. Over age 18 and under age 24 at the end of 2020 and a full-time student (defined later) and your earned income (defined later) was less than one-half of your support (defined later).
  2. At least one of your parents was alive at the end of 2020.
  3. You're not filing a joint return for 2020.

If you meet these conditions, check the box next to line 7, skip line 8, and enter the amount from line 7 on line 9. If these conditions don't apply to you, complete line 8.

You can answer the following questions to determine whether you qualify for a refundable American opportunity credit.

  1. Were you under age 24 at the end of 2020?
    If no, stop here; you do qualify to claim part of the allowable American opportunity credit as a refundable credit.
    If yes, go to question 2.
  2. Were you over age 18 at the end of 2020?
    If yes, go to question 3.
    If no, go to question 4.
  3. Were you a full-time student (defined later) for 2020?
    If no, stop here; you do qualify to claim part of your allowable American opportunity credit as a refundable credit.
    If yes, go to question 5.
  4. Were you age 18 at the end of 2020?
    If yes, go to question 5
    If no, go to question 6.
  5. Was your earned income (defined later) less than one-half of your support (defined later) for 2020?
    If no, stop here; you do qualify to claim part of your allowable American opportunity credit as a refundable credit.
    If yes, go to question 6.
  6. Were either of your parents alive at the end of 2020?
    If no, stop here; you do qualify to claim part of your allowable American opportunity credit as a refundable credit.
    If yes, go to question 7.
  7. Are you filing a joint return for 2020?
    If no, you don't qualify to claim part of your allowable American opportunity credit as a refundable credit.
    If yes, you do qualify to claim part of your allowable American opportunity credit as a refundable credit.

In the TaxAct program, if the information for the student (who is also the taxpayer on the return) is entered and they are under the age of 24, the screen titled Student Information - Qualifications in the Education section of the Federal Q&A lists the three conditions and asks whether those conditions apply to the student.

If the return qualifies for the American Opportunity Credit, there may also be a Green Alert in the Alerts section titled Explanation: American Opportunity Credit which will prompt for verification whether the three conditions mentioned in the IRS instructions apply. Click the information icon on that screen for additional information.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.


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