Dependent College Student

[csenec]

My daughter is in her first year of full time college. She took some college classes while in high school. All of the forms we have received from both colleges are in her name. We are claiming her as a dependent. Are we able to claim her college expenses?  We also paid interest on her student loan that my husband co-signed. The 1098-E came in her name. If so how do we do that? She did make a little income from a summer job.  

[xmasbaby0]

When you claim your child as a dependent the education credits are entered on YOUR own tax return.  You can use the 1098Ton your return.    And if you signed or co-signed the student loan you can enter the interest from the 1098E you paid in 2020 on your own return.   

If your daughter had a job she can file her own tax return in order to seek a refund of tax withheld from her pay. She must say on her own return that she can be claimed as someone else's dependent.

[xmasbaby0]

QUALIFIED EDUCATION EXPENSES

https://ttlc.intuit.com/questions/1899852-what-are-considered-qualified-education-expenses

https://ttlc.intuit.com/questions/2976047-what-are-examples-of-education-expenses

https://www.eitc.irs.gov/other-refundable-credits-toolkit/compare-education-credits-and-tuition-and-...

https://ttlc.intuit.com/questions/1900981-can-i-deduct-education-expenses-that-were-paid-with-studen...

https://ttlc.intuit.com/questions/1901172-what-are-education-tax-credits

https://ttlc.intuit.com/questions/1901487-what-is-the-tuition-and-fees-deduction

https://ttlc.intuit.com/questions/1901172-what-education-tax-credits-are-available      

https://www.irs.gov/help/ita/am-i-eligible-to-claim-an-education-credit

https://ttlc.intuit.com/questions/3262983-who-is-eligible-to-take-the-american-opportunity-tax-credi...

STUDENT LOAN INTEREST

Only the person whose name is on the student loan and who is legally obligated to pay the loan can deduct the student loan interest.  If you did not sign or co-sign for the loan you cannot deduct the interest.

You cannot deduct student loan interest if you are being claimed as someone else’s dependent, or if you are filing as married filing separately.

The student loan interest deduction can reduce your taxable income by up to $2500

There is a phaseout for the Student loan interest deduction, which means the amount you can deduct gets reduced when your modified adjusted gross income hits certain income levels and is even eliminated at certain income levels -  

•If your filing status is single, head of household, or qualifying widow(er), then the phaseout begins at $65,000 until $80,000, after which the deduction is eliminated entirely.

•If your filing status is married filing joint, then the phaseout beings at  $130,000 until $160,000, after which the deduction is eliminated entirely.

 Enter the interest you paid for your student loan by going to Federal>Deductions and Credits>Education>Student Loan Interest Paid in 2020 (Form 1098E)

Look on your 2020 Schedule 1 line 20 to see your student loan interest deduction

[Hal_Al]

Q. Are we able to claim her college expenses?

A. Yes.  Even though the 1098-T is in her name, you enter it on your return, since she is your dependent.

Q.   We also paid interest on her student loan that my husband co-signed.  Can we claim that too?

A.  Yes, because you paid it and had a legal obligation to pay it.  Again, use her 1098-E to enter.

Q.  She took some college classes while in high school. Does that cost count?

A. Maybe.  You can only claim one credit.  You may only be able to count the full time courses for The American Opportunity.  

High school students are not usually eligible for the more generous American Opportunity Credit, unless they are officially enrolled as a degree candidate.  From pub 970: "Example 3. During the 2015 fall semester, Larry was a high school student who took classes on a half-time basis at College X. Larry wasn't enrolled as part of a degree program at College X because College X only admits students to a degree program if they have a high school diploma or equivalent. Because Larry wasn't enrolled in a degree program at College X during 2015, Larry wasn't an eligible student for tax year 2015."  Reference: https://www.irs.gov/publications/p970/ch02.html

You may be able to count both schools tuition for the lesser Lifetime Learning Credit.  If these courses are provided by an eligible college, this cost qualifies for the Lifetime Learning Credit (LLC). The school must have policy of granting college credit for that course, already taken, if the student ever enrolls there. In other words, it is a requirement that the course be a college credit course, even if the student isn't currently a college student. It’s not that  the student is post secondary, it’s that the course is post secondary. Books are not  a qualifying expense, unless included in the course fee.