Eligibility Requirements for Two Popular Tax Credits

IRS requires me to ask you more questions

In an effort to prevent taxpayers from improperly claiming the Child Tax Credit (CTC) and American Opportunity Tax Credit (AOTC), the IRS is implementing additional preparer due diligence requirements and requesting preparers to verify more information from clients who may be eligible to claim these credits. Because of these new requirements, I’ll be asking more questions to verify your eligibility. Following are some of the “tests” I’ll use to determine whether you qualify.

The CTC is a tax credit that may be worth as much as $1,000 per qualifying child, depending on your income. To qualify for this credit, a child must pass these six tests:

  • Age Test. A child must have been under age 17 at the end of 2016.
  • Relationship Test. The child must either be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendent of any of these individuals, which includes your grandchild, niece or nephew.
  • Support Test. The child must not have provided more than half of his or her own support.
  • Dependent Test. You must claim the child as a dependent on your federal tax return.
  • Citizenship Test. The child must be a U.S. citizen or national, or a resident of the U.S., Canada or Mexico.
  • Residence Test. Generally, the child must have lived with you for more than half of 2016.

The AOTC is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. You can get a maximum annual credit of $2,500 per eligible student. To be eligible for this credit, the student must:

  • Be pursuing a degree or other recognized education credential.
  • Be enrolled at least half time for at least one academic period beginning in the tax year.
  • Not have finished the first four years of higher education at the beginning of the tax year.
  • Not have claimed the AOTC or the former Hope credit for more than four tax years.
  • Not have a felony drug conviction at the end of the tax year.

In addition to the eligibility requirements above, there are also income limits for claiming these credits. I can help you determine whether your income qualifies you for these credits.

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