When parents are paying for a child's college or graduate tuition, who gets to claim the education tax credits can become a heated discussion. With significant tax incentives, like the American Opportunity Tax Credit and the Lifetime Learning Credit potentially at stake, making sure you know who should be claiming the child's expenses is a big deal.
In order to claim an education tax credit, the taxpayer must be paying the expenses for herself, her spouse or her dependent. The IRS makes no exception for children who cannot be claimed as a dependent for one reason or another. In the case of the tuition and fees deduction, if the parent pays for education expenses and the student is not claimed as a dependent, the deduction is lost. However, the student might be able to use the American Opportunity Tax Credit or the Lifetime Learning Credit.
Who Claims Expenses
For the American Opportunity Tax Credit and the Lifetime Learning Credit, qualifying educational expenses must be claimed by the person who gets to claim the student's exemption. If the student can't be claimed as a dependent by someone else, the student gets to claim his own exemption, and therefore gets to take the education credit. Even if someone else, such as a parent, is paying the costs directly to the school, the IRS treats the parent as making a gift to the son and then the son paying the expenses. Therefore, the son would get to take credit for the expenses paid by the parent.
Who Can Be a Dependent
A child who is a full-time student can generally be claimed as a qualifying child until the year he turns 24. The son can't provide more than half his own support and must life with his parents for at least half the year, but an exception is made for the time he is away at school. If the son is 24 or older at the end of the year, he has to pass the more stringent tests to be claimed as a qualifying relative. This requires that the son not have more gross income than the annual exemption amount — $3,800 as of 2012 — and the parent must provide more than half the son's support.
Only qualifying educational expenses can be claimed on income taxes anyway. To qualify for an education tax credit, the student must be enrolled at a post-secondary school, such as a college, university, trade school or vocational school. For the Lifetime Learning Credit and the tuition and fees deduction, the educational expenses are limited to tuition and required fees. For the American Opportunity Tax Credit, books and supplies are also included. Room and board or other living expenses don't qualify for a tax credit.
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