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American Opportunity Credit for International Student


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I have been asked the following question and I do not know the answer:

Taxpayer is an international student on F-1 Visa. She has no taxable income to report in 2017. However she has spent money on tuition for her undergraduate degree. She wants to know if she can file a tax return with zero income but get refundable portion of Hope credit.

I have looked over the requirements for Hope Credit and citizenship is not a condition for it. My question is "Is it legal for her to get refundable portion of hope credit in this case?

Thanks for your help.

Naveen Mohan

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https://www.irs.gov/newsroom/american-opportunity-tax-credit-questions-and-answers

 

Q19. Can F-1 Visa students claim the AOTC?

A. For most alien individuals present in the U.S. on an F-1 Student Visa, the answer is no. Generally speaking, the time spent by an alien individual studying in the U.S. on an F-1 Student Visa would not count toward determining whether he or she was a resident alien under the substantial presence test for federal tax purposes. Thus, if you are an alien individual with an F-1 Student Visa, you are probably a nonresident alien. In general, if you are a nonresident alien for any part of the year, you do not qualify for the AOTC.

However, your parents may qualify for the credit even if you are a nonresident alien student if they claim you as a dependent on their tax return. If you are a U.S. resident filing Form 1040, and your parents do not claim you as a dependant, and you meet all of the other requirements for the credit, you may qualify for the credit.

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Students who are dependents do not qualify for the refundable portion of the AOC.  Since Naveen's client has no taxable income, no dice even if parents filed a US return.  I do have some clients who make way too much for the credit but their students have taxable income.  I try the return both ways, with and w/o the dependent, to see if it will help the family tax situation.  Rarely but sometimes what they lose in the dependency exemption is more than made up by the student getting the credit.

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