 Most of this information comes from Publication 970, Tax Benefits for Education Taxure 2022. You can find it on the IRS website, irs.gov, irs.gov. Looking at the income tax formula, we're down here at the bottom where the credits are located. Remember, the first half of the income tax formula is in essence an income statement, although a strange one. The bottom of it being taxable income as opposed to net income and a normal income statement. We calculate the tax on the taxable income, not with one rate, but with the progressive tax system to get to the tax before credits and other taxes, then we get to the credits and other taxes, like self-employment tax, for example, and the payments, finally, which would include estimated tax payments, as well as withholdings to get to the bottom line. Tax refund or tax due credits are similar to deductions in that we like them both. If we can get a dollar credit versus a dollar deduction, we typically want the dollar credit because we get the full dollar of benefit as opposed to a dollar deduction simply decreasing the taxable income and our benefit being reflected or shaped by the tax rate. Also remember that the credits are categorized in two major categories, non-refundable and refundable. Non-refundable credits don't take the tax liability below zero. Non-refundable credits do, meaning they're using the tax code more like a welfare or benefit program for that refundable portion than for taxes. Okay, can you claim the credit for the American Opportunity Credit? The following rules will help you determine if you are eligible to claim the American Opportunity Credit on your tax return. That's what we want to know. Who can claim the credit? Generally, I want the credit. I want the credit. I get the credit. Generally, you can claim the American Opportunity Credit if all three of the following requirements are met. You pay qualified education expenses of higher education. You're typically thinking like college, something like that. You pay the education expenses for an eligible student. So the student's got to be eligible. The eligible student is either yourself, so you can be paying for your own, your spouse, someone that's going to be reported on the same tax return because you're married, filing a joint or dependent once again someone that's being reported on your tax return in this case as a dependent. Is there social security number or identification number on your tax return is the general idea? So you can claim your tax return. So note, qualified education expenses paid by a dependent you claim on your tax return or by a third party for that dependent are considered paid by you. So you don't really have to do any kind of fancy money finagling these kind of situations. If you have an uncle that wants to pay for like a kid going to college, the uncle doesn't necessarily have to give the money to like the parent or to the kid so that then they then are the ones that are paying for, you know, so it would have to be a gift and then a, you know, because you would think that if the uncle paid for it, that somebody should get the benefit of the expenses. The uncle can't do it because they're not claiming the kid as a dependent. In that case, in the scenario we are imagining, so you would think someone would be able to get the benefit if the kid paid for the education expenses, but they're claimed as a dependent, then you would think they can't claim it. You would think that the parent would still be able to claim it because they are dependent in that case and therefore you would think they would get it. All right. So, what are the qualifications? Generally, you can claim the American Opportunity Credit for a student only if all the following four requirements are met. What are they? Number one, as of the beginning of 2022, the student had not completed the first four years of post-secondary education, generally the freshmen through senior years of college. So, we're thinking usually when we think of college, we kind of break it down into like the four-year segments, although of course it could take people much longer or shorter in reality to get through the four-year segment timeframe, but you're usually thinking that's the four years of college, the general four-year categorization. Okay. So, generally the freshmen through senior years of college as determined by the educational institution. So, if you have questions about that and it's a little bit less normal of a structure or something, then you got to talk to the educational institution. You can get some information there. For this purpose, don't include academic credit awarded solely because the student's performance on proficiency examinations. So proficiency examinations may qualify the student to bypass or something part of the credits, which can make things a little bit confusing in those cases. All right. Two, the American Opportunity Credit has not been claimed by you or anyone else below for this student for any four tax years before 2022 because if you did, then you're done because you only get the four tax years generally. If the American Opportunity Credit has been claimed for this student for any three or fewer tax years before 2022, this requirement is met number three for at least one academic period beginning or treated as beginning in 2022, the student both A was enrolled in a program that leads to a degree certificate or other recognized educational credential. So again, usually that's fairly straightforward, but you can imagine kind of unusual situations where it may not be as straightforward. So we want to make sure that that is met in those more possibly unusual kind of educational situations be carried at least one half the normal full-time workload of his or her course of study. So now you get into the technical question of, well, what does it mean to be carrying one half the normal full-time workload, which also is a question that often can be answered talking to the educational institution, which often you would imagine gets questions around these areas. So the standard for what is half a normal full workload is determined by each eligible educational institution. However, the standard may not be lower than any of those established by the U.S. Department of Education under the Higher Education Act of 1965 for 2022 treat an academic period beginning in the first three months of 2023, as if it began in 2022 if qualified education expenses for the student were paid in 2022 for that academic period. So we have that cutoff situation. We typically account on a cash-based system when we're thinking about deductions and payments and whatnot. And that means that if you paid for something in 2022, you should get the deduction or related expenses related to it or credits related to it. You would think in 2022, even though the thing didn't happen until 2023, although there could be limitations on that because the IRS is going to be skeptical that you take advantage of this kind of prepayment situation. Okay, number four, as of the end of 2022, the student had not been convicted of a federal or state felony for possessing or distributing a controlled substance. So they kind of threw that one in there, possibly because at one time they were having a problem with those controlled substances on the oncologist. You would think might be the reasons for that. But in any case, example one, Sharon was eligible for the American Opportunity Credit for 2016, 17, 19, and 21. Sharon's parents claimed the American Opportunity Credit for Sharon on their 2016, 17, and 19 tax returns. Sharon claimed the American Opportunity Credit on her 2021 tax return. So in other words, you would think she was a dependent for the first three years, and then she claimed it herself on her own tax returns. That's four years total that it was claimed somewhere per Social Security Number, Sharon's, whether that Social Security Number be on her parents' returns or on her returns. So the American Opportunity Credit has been claimed for Sharon for four tax years before 2022. However, the American Opportunity Credit can't be claimed for Sharon for 2022. If Sharon were to file Form 8863 for 2022, the box on Part 3, Line 23, should be checked yes and only the lifetime learning credit would be able to be claimed. So she couldn't get the better credit because she did the four years already of claiming it and therefore possibly still can get a lifetime learning credit in that case.