My dependent college grad on own. Where do her 1098-T and loan interest get recorded under. My taxes since she's a dependent or hers? Same for my other college kids?

[MayaD · Accepted solution]

If your college kids qualify as dependents on your return and you will actually claim them, then report the 1098-T on your return. Only you can claim the education credit.

Regarding the 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.

[rjc3296]

Can you clarify for me.....

My daughter graduated college in May 2019, and lived with me until the end of August 2019.  She still qualifies as a dependent and I can claim her, correct?  But her 1098-E goes on her return, correct?

[KrisD15]

She is your dependent if she did not supply half of her own support. 

If she is your dependent, you must report the 1098-E on your return. 

IRS Pub 970 page 32

[Hal_Al · Accepted solution]

Q. Does She still qualify as a dependent? Can I  claim her? 

A. Maybe.  

Graduation year

If he/she was a student (under 24) for at least 5 months and lived with you for more than half the year, and did not provide more than 1/2 his own support for the whole year, you can still claim him. Be sure he knows you're claiming him, so he doesn't claim himself. He can only be claimed once. But, he can "file taxes" without claiming himself.  Interestingly, with the new 2018 tax law, dependents get the same refund (or pay the same tax) whether they claim themselves or not.  The exemption deduction was eliminated and the standard deduction doubled.

The real question is who should be claiming him in this "transition" year to adulthood. You two have to agree on who is going to claim his exemption. Each should do their taxes both ways and see which way the family comes out best.  Even then, you have to meet the rules. The rule is that a child of a taxpayer can still be a “Qualifying Child”** dependent, regardless of  his income, if:

1. he is a full time student under 24 for at least 5 calendar months of the year (graduating in May usually means you meet the 5 month rule)
2. he did not provide more than 1/2 his own support (scholarships are considered 3rd party support and not support provided by the student). 
3. lived with the parent (including time away at school) for more than half the year

So, it usually hinges on  "Did he provide more than 1/2 his own support in 2016.

The support value of the home you provided is the fair market rental value of the home plus utilities & other expenses divided by the number of occupants. IRS Publication 501 on page 20 has a worksheet that can be used to help with the support calculation. See: http://www.irs.gov/pub/irs-pdf/p501.pdf

**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, relationship test and residence test. Only a QC qualifies a taxpayer for the Earned Income Credit and the Child Tax Credit. They are interrelated but the rules are different for each.

[Hal_Al]

Q. But her 1098-E goes on her return, correct?

Are asking about a 1098-E (Student Loan interest) or 1098-T (college tuition)?  

The 1098-E goes on her return, only if she is NOT your dependent. If she is your dependent, she can not take the interest deduction. If she is not your dependent, you can only claim the student loan interest deduction if you co-signed the loan and  actually paid the interest.

The 1098-T goes with her dependency.  If you claim her, you claim the tuition credit. If you do not claim her, she claims the tuition credit.

[rjc3296]

Thank you......

She did live away at school, and lived with us for more than half the year, and based on how you define the fir market value, I'd say we supported her as she left in September.    But, I know I add the 1098-T under me, but I thought she is the only one who can claim the 1098-E -- interest paid on loan.  Can you clarify?

[Hal_Al]

Yes,  she is the only one who can claim the 1098-E, interest paid on loan., if the loan is solely in her name.

But, if she is a dependent, on your return, she is not allowed to claim that deduction.  The deduction is lost. That's the rules.