Tax Deductions for Expenses Paid for Children Not Claimed as Dependents

To claim the child-care credit, you must have a dependent.

To claim the child-care credit, you must have a dependent.

Education and child-care expenses can take a big part of your monthly budget. The federal tax laws will give you a deduction or credit for some of these costs, but you'll have some rules and conditions to keep in mind. Guidelines vary with the tax break you're claiming; a key consideration is whether or not you claim the child as a dependent.

Exchange Students and Adoption

The Internal Revenue Service allows a few deductions for expenses for a nondependent child. If you have an exchange student in the household, for example, you can deduct a maximum of $50 a month in expenses as a charitable contribution. This deduction requires the child to be a nondependent and not related to you. If you have adoption expenses, the IRS allows a tax credit that was subject to a maximum of $12,970 per child in 2013. The expenses may be for reasonable and necessary fees, court costs, travel expenses and all other costs related to a legal adoption; the child must be under 18 or unable to care for himself. This deduction could apply to the adoption of a child who is not claimed as a dependent.

Student Loan Interest

Student loan interest paid on behalf of a child by a parent is also deductible. The IRS does not require the child to be claimed as a dependent on the parent's return for this deduction, but it does require that the loan was taken out when the child was a dependent. The rules restrict the deduction -- which is limited to $2,500 as of 2013 -- to those reporting $75,000 or less in adjusted gross income.

Divorce and Separation

In the case of a legal divorce or separation, the IRS will allow the two parents to divide the tax benefits of having children. Normally, the custodial parent would claim any children as dependents and take the related exemptions. However, you may waive the claim to the exemption and turn that right over to the noncustodial parent. This also allows the noncustodial parent to claim the child tax credit, even though the child is, technically, not a dependent. The parents must live apart throughout the last six months of the year, and the parents must have provided more than half the child's support. To waive the right to claim an exemption, you must file Form 8332.

Child Care and Education Expenses

Some tax breaks require dependent status. The IRS rules allow a credit for child-care expenses, but the child must be "qualifying," or a dependent you claim on your tax return. In addition, the child must be 12 years old or younger, and you must also pay the expenses to a qualified caregiver. The IRS also provides a deduction for educational expenses as well as the American Opportunity Credit and the Lifetime Learning Credit, which are for tuition and fees; in both cases, the child whose expenses you paid must be a dependent. In addition, for the deduction for education expenses, you must also claim an exemption for the child on your tax return. Contributions on behalf of a child to 529 plans, designed as education savings plans, are not deductible whether or not the child is your dependent.


About the Author

Founder/president of the innovative reference publisher The Archive LLC, Tom Streissguth has been a self-employed business owner, independent bookseller and freelance author in the school/library market. Holding a bachelor's degree from Yale, Streissguth has published more than 100 works of history, biography, current affairs and geography for young readers.

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