How to maximize American Opportunity Credit with two college students near MAGI phaseout threshold?

Wait I'm confused about this. My daughter is in college and has a part time job. If I don't claim her as a dependent, are you saying she still can't claim the American Opportunity Credit on her own taxes? What if she uses her own money from her job to pay for some of her tuition? Does that change anything?

The key factor is who provides more than half of your daughter's total support for the year - not just who pays the tuition. Support includes housing, food, medical expenses, clothing, education, etc. If your daughter pays for her own tuition with her job earnings but you're still covering most of her other expenses (housing, food, etc.), and those total more than what she provides for herself, then she's still considered your dependent for tax purposes - even if you choose not to claim her. In that case, she wouldn't be eligible to claim the AOC on her own return. If she genuinely provides more than half of her total support from all sources, then she could claim the credit on her own return, and yes, using her own money for tuition would count toward her self-support calculation.

Yes, they specifically have features for self-employed individuals! That's actually where I saw the biggest benefit. Their system found several legitimate business deductions I was missing that helped lower my MAGI enough to qualify for more of the American Opportunity Credit. They have specific categories for side businesses that many tax software programs overlook. They don't actually file your taxes - they analyze your specific situation and give you detailed recommendations you can implement yourself in whatever tax software you're using. It's different from an accountant because it uses AI to compare thousands of tax scenarios specific to your situation rather than relying on just one person's knowledge. I found it particularly helpful for education credits because they have specific optimization tools just for the American Opportunity Credit and other education benefits.

Does taxr.ai work with self-employed people? I have a side business plus my regular job and I'm trying to figure out if I can get my MAGI down enough to qualify for more education credits for my daughter's college. TurboTax seems to miss some deductions for small business owners.

I'm skeptical about these tax analyzer services. How is this different from what an accountant would do? And do they actually do your taxes for you or just give recommendations that you still have to implement yourself? I need to maximize my American Opportunity Credit too but don't want to waste money on something that just tells me what I already know.

Yes, they specifically have features for self-employed individuals! That's actually where I saw the biggest benefit.

How does this service actually work? Do they have some special connection to the IRS or something? I've been trying to get through to ask about my American Opportunity Credit since I have a similar situation with two kids in college but slightly over the income limit.

This sounds like BS honestly. No way anyone can magically get through the IRS phone lines when millions of people are calling. I've tried calling about my education credits 5 times this season already. If this actually worked, everyone would be using it. Sounds like you're just promoting some service.

They basically use technology to navigate the IRS phone system and hold your place in line. When they get close to an agent, they call you and connect you directly. It's like having someone wait on hold for you, but automated. No special connection to the IRS - they just know how to work the phone system efficiently. They call at optimal times and use their system to navigate the IRS phone tree. I was skeptical too until I used it. You still talk directly with the same IRS agents everyone else does, but you don't have to waste hours on hold. The American Opportunity Credit questions I had were complicated, and I really needed official answers from the IRS rather than guessing.

Our kids do have small scholarships, but nothing major - about $3,500 each. The tuition is around $26k per year per child, so we still have plenty of qualified expenses even after subtracting the scholarships. My bigger concern is the income phaseout killing most of our credit. Do you know if there are any other deductions besides retirement accounts that could help lower our MAGI? We're so close to that $180k upper limit.

Definitely look into HSA contributions if you have a high-deductible health plan - those reduce your MAGI. Also, if either of you has any self-employment income, SEP IRA or Solo 401k contributions can make a much bigger dent than regular IRAs. Another option that people often overlook is capital losses. If you have any investments that are currently at a loss, you could sell them and realize up to $3,000 in net losses that would reduce your income. Just be careful about wash sale rules if you want to rebuy similar investments. For the American Opportunity Credit specifically, remember you can include required books and supplies purchased directly from any vendor (not just the college bookstore), so make sure you're counting all eligible expenses to maximize what you can claim even with the phaseout.

Yes, you can absolutely claim the American Opportunity Credit for one student and the Lifetime Learning Credit for another on the same tax return! We do this exact thing - AOC for our sophomore (up to $2,500) and LLC for our grad student (up to $2,000 at the 20% rate). Just make sure you're not claiming both credits for the same student, and don't double-count any expenses. Each student needs their own Form 8863. The income phaseout limits are the same for both credits for married filing jointly ($160k-$180k MAGI).

Thank you for mentioning the HSA strategy! I completely forgot that you can contribute up until the filing deadline. We do have a family HDHP and haven't maxed out our HSA yet this year. That could be a game-changer for getting our MAGI down enough to qualify for more of the American Opportunity Credit. Quick question - do you know if the HSA contribution deadline is April 15th like IRAs, or does it follow the calendar year? With two kids in college, every dollar of credit we can salvage makes a huge difference. The phaseout is so harsh when you're right at that $180k threshold.