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Tax Implications of Student Status

Questions have been raised about the various definitions of a student and when they apply.

Half-time

CORRECTION TO YOU CAN DO IT! GUIDE:

American Opportunity Credit: The “Benefits Related to Education” discussion on page 49 of this year’s “You Can Do It!” guide incorrectly indicates that you must be a Full-time undergraduate in a degree program to qualify for the American Opportunity Credit (AOC). The correct requirement is that you must be enrolled at least half-time for at least one academic period beginning during the tax year (or the first three months of the following tax year if the expenses were paid in the tax year). Box 8 of Form 1098T would be checked if the student met the “at least half-time” requirement for the AOC.

Full-time

The half-time definition should not be confused with the use of the full-time student definition of an individual 19 to under 24 that is used for a number of other tax preparation purposes such as whether the student is considered a Qualifying Child (QC) for a taxpayer’s Dependency Exemption, Earned Income Tax Credit, and/or Head of Household filing status. That definition includes the language “ You were a full-time student during some part of each of any 5 calendar months of the year...” (note that the five months do not have to be consecutive)

In other situations, the full-time student definition applies to the student when you answer the question “whether you can be claimed (or are claimed) as a dependent (QC or QR)”, whether you qualify for the refundable part of the American Opportunity Credit, and/or whether you qualify for the retirement “Saver’s Credit.” (IRS Publications such as 17, 501, 970, and/or 4012 should be referred to for more complete explanations) 

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