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Case Study 4: Kiddie Tax (continued)In another scenario, the student Juan chooses to include the entire grant as income on his return. Juan's parents can claim the entire $4,000 education expenses toward the American opportunity credit. Juan's gross income is $10,600 + $4,000 = $14,600. As a dependent, Juan now has a filing requirement and unearned income (the taxable scholarship) over the kiddie tax ceiling amount. Click here for an explanation. The kiddie tax applies in this scenario and Juan will use Form 8615 to compute his tax. Form 8615 is out of scope. His parents claim $2,500 for the American opportunity credit. Note: The kiddie tax ceiling amount is adjusted for inflation each year. 
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