Can I claim my daughters student loan and educational credits if not a dependent?

[shawnMsrm]

In 2020 year we claimed our daughter as a dependent being a full time student. This year all variables are the same except we did not provide more than half of her annual support.

Also in 2020 we were able to deduct the student loan and educational credits.

Am I correct in understanding since we cannot claim her as a dependent, we can no longer deduct the student loan and educational credits? On my daughter's tax return, she will be able to claim the student loan and educational credits. Correct?

[DoninGA]

If she is not being claimed as a dependent on your 2021 tax return then you cannot report any education credits for her on your tax return.  She can report the education credits on her 2021 tax return.

[Hal_Al]

@shawnMsrm  said "we cannot  claim our full time student daughter as a dependent because we did not provide more than half of her annual support."

That may not be true. 

There are two types of dependents, "Qualifying Children"(QC) and standard ("Qualifying Relative" in IRS parlance even though they don't have to actually be related). There is no income limit for a QC but there is an age limit, student status, a relationship test and residence test. 

The support test is different for each type. The support test, for a QC, is only that the child didn't provide more than half his own support. The support test for a Qualifying Relative is that the taxpayer provided more than half the relative's support.

A child of a taxpayer can still be a “Qualifying Child” (QC) dependent, regardless of his/her income, if:

1. He is under age 19, or under 24 if a full time student for at least 5 months of the year, or is totally & permanently disabled
2. He did not provide more than 1/2 his own support. Scholarships are excluded from the support calculation.  Note that it is not necessary that you provided more than half her support.  Student loans, solely in her name, are considered her supporting herself.  But, if you co-signed they, are not considered her supporting herself. 
3. He lived with the parent (including temporary absences such as away at school) for more than half the year

[shawnMsrm]

OK, so if I don't claim my daughter on my 2021 tax return I cannot report any education credits, loan interest, etc. for her on my tax return.  She can report these credits on her 2021 tax return.

Concerning claiming her, she meets all this criteria - she is my daughter, age of 21, went to school full time for five months (Aug-Dec), and lived on campus (residence is still home).

For this criteria, I'm still not sure - The claimed dependent must not have provided more than ½ of their own support during the year, even if they were able to. However, income from scholarships is not considered support.

In the feedback I received, there was the note about cosigning and scholarships. For all her loans and apartment, I did co-sign for everything. By cosigning, does this possibly change how the 1/2 support question should be answered. Here total income for 2021 was 26K. 

[Hal_Al · Accepted solution]

Cosigning for her apartment lease does NOT count as support you provided. Cosigning the student loan DOES count as support you provided.  Scholarships and the the expenses they paid are ignored (left out of the support calculation).

At $26,000 income, it's unlikely that she didn't  provide more tan half her own support. Unless her income went into savings.  Do not count scholarships  as her income. 

The IRS has a worksheet that can be used to help with the support calculation. See: http://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf

The support value of the home, provided by the parent, is the fair market rental value of the home plus utilities & other expenses divided by the number of occupants.

[shawnMsrm]

Thank you all for your help. I read through everything and completed the form noted. Unfortunately I will not be able to claim her nor any of the education expenses.

I appreciate the quick support and all the guidance.