Case Study 4: Kiddie Tax (continued)

In another scenario, the student Juan chooses to declare $2,000 of the grant as income on his return and his parents use the education expenses toward the American opportunity credit. Juan's gross income is $10,600 + $2,000 = $12,600. As a dependent, Juan has no filing requirement and he has no tax. His parents claim $2,000 as qualified education expenses.

Click here for an explanation.