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 7 questions to help determine if the 3 conditions apply or not. Below the IRS instructions section, you will see information pertaining to the TaxAct® program and the Green Alert that may be generating.
Per IRS Instructions for Form 8863 Education Credits (American Opportunity and Lifetime Learning Credits), page 6:
Line 7
If you were under age 24 at the end of 2019 and the conditionslisted below apply to you, you cannot claim any part of theAmerican opportunity credit as a refundable credit on your taxreturn. Instead, you can claim your allowed credit, figured in PartII, 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.
You were:
- Under age 18 at the end of 2019, or
- Age 18 at the end of 2019 and your earned income (defined later) was less than one-half of your support (defined later), or
- Over age 18 and under age 24 at the end of 2019 and full-time student (defined later) and your earned income (defined later) was less than one-half of your support (defined later).
- At least one of your parents was alive at the end of 2019.
- You're not filing a joint return for 2019.
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 (i.e. to determine whether or not you meet the 3 conditions listed above).
- Were you under age 24 at the end of 2019?
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.
- Were you over age 18 at the end of 2019?
If yes, go to question 3.
If no, go to question 4.
- Were you a full-time student (defined later) for 2019?
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.
- Were you 18 at the end of 2019?
If yes, go to question 5.
If no, go to question 6.
- Was your earned income (defined later) less than one-half of your support (defined later) for 2019?
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.
- Were either of your parents alive at the end of 2019?
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.
- Are you filing a joint return for 2019?
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 third screen titled Student Information - Qualifications in the education section of the Federal Q&A contains the 3 conditions and asks if those conditions apply to the student. There is an information icon link adjacent to Need more help available on the screen to provide additional help in determining the correct answer.
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 3 conditions mentioned above in the IRS instructions apply or not. There is also the same information icon link available on that screen for additional information.