I don't qualify for any of the educational credits on my return. My 19 year old daughter attended 1 semester of college in 2020. Tuition and board was around $10k. She received $5k in scholarships. She made $9k working. Her refund goes up $2k if i put all the education stuff on her return and mine drops only $500 if i don't claim here. Am I allowed to let her claim herself to get these credits?
If she did not pay more than half of her support in 2020 and you provided more than half of her support, then you can claim her as a dependent.
If you claim her as a dependent then only you can claim her education credits, even if you are disqualified by your income.
If you can claim her but do not actually claim her as a dependent, then on her own tax return, she can claim the non-refundable portion of the American Opportunity tax credit. and not the refundable portion. However, as her income is below the standard deduction of $12,400, she has no taxable income, and the non-refundable portion of the AOTC gives no tax benefit.
[Edited 02/02/2021 01:24 PM PST]
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Is support just costs related to college? Half of her support was from scholarships and almost other half was from 529 distribution. Maybe $2k was paid out of pocket.
There are two things going on here. In your child's personal interview, there are two questions,
- "Can someone else claim you? and
- "Will that other taxpayer actually claim you this year?"
If your daughter can be claimed as a dependent, she must check that box, even if you don't want to claim her. Failing to check that box would result in certain tax benefits including this year, the stimulus credit, and would be tax fraud.
However, if she answers that she can be claimed but won't be claimed, that will allow her to claim a partial American Opportunity Credit. This is usually used when the parents' income it too high to claim the AOTC, and the child must have more than $12,400 income from working to get even a partial benefit, but it may be better than nothing. In this case, you would enter the 1098-T on the student's return, not the parents' return.
Now to the question of whether she can be claimed:
A college student can be claimed as a dependent by their parent if they are
- A full time student under age 24
- Live with their parents more than half the year
- Don't provide more than half their own support
For the "live with their parents" question, a child is deemed to live with their parents during temporary absences, and college is usually considered a temporary absence. If your child comes home over the summer, and still uses your home as an address and has their extra "stuff" there, they probably count as living at home. (Some college students do actually move out permanently. If this is the case, you will need to save proof in case the IRS audits your dependent situation.)
For the support question, the child's need or cost includes room and board, tuition, clothing, travel, entertainment and medical expenses. Support the child provides themself includes earnings from a job or investments and student loans taken out in their own name. For support provided by the parents, you include any direct costs you pay, student loans you take out in your name (parent loans), the value of medical insurance if they are on your plan, and the value of room and board at your home where the child lives. (Essentially, an equal share of rent, food, utilities, and other household expenses. If your household is you, your spouse and your child, then 1/3 is assigned to your child. If 4 people live in the home, 1/4, and so on.). Scholarships and grants don't count on either side of the equation.
Add up your child's total costs, what you provide, and what the child provides, to see if the child provides "more than half" their own support.
Q. Can my 19 year old kid claim herself to get the education credits?
A. No, No., & No.
No, because she can be claimed as a dependent. You are not allowed to let her claim herself.
No, because she does not have enough income to benefit from the non refundable education credit. There is actually a special provision that allows the parent to forego the dependent (and the $500 other dependent credit), so that the student can claim the non refundable credit. But, it's rare for a student to get any benefit.
No, because a full time unmarried student, under age 24, whether a dependent or not, is only eligible for the refundable portion of the American Opportunity Credit if he supports himself by working. You cannot be supporting yourself on parental support, 529 plans or student loans & grants. You usually must have actually paid tuition, not had it paid by scholarships & grants.
The reason, you're seeing her refund going up $2K is you've entered her information wrong; most likely the earned income support question in the personal info section.