If I, the student claim education tax credit, can my parents still claim me as a dependent?

[rhiacebedo03]

They paid for some of my education expenses and student loans

[Hal_Al · Accepted solution]

No.

But you've got the cart before the horse. If your parents can claim you as a dependent, you are not allowed to claim the education credit**. 

Furthermore, there is a rule that says IF somebody else CAN claim YOU as a dependent, You are not allowed to claim your own exemption. If you can't claim yourself, you also cannot claim the tuition credit**. If you have  sufficient income (usually more than $6300),  you can & should still file taxes, you just don’t get your own $4000 exemption (deduction). In TurboTax, you indicate that somebody else can claim you as a dependent.

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

3. He lived with the parent (including temporary absences such as away at school) for more than half the year

There's a new urban myth among college students that says they can get a $1000 from the government just for filing a tax form. For most of them, they simply aren't eligible. A student, under age 24, is only eligible for the refundable portion of the American Opportunity Credit if he supports himself by working (earned income). You cannot be supporting yourself on parental support, 529 plans or student loans & grants. You must have actually paid tuition, not had it paid by scholarships & grants.  It is usually best if the parent claims that credit.  

**While technically there is a provision that allows you to claim a tuition credit, from a practical matter it seldom works out.  A student, under age 24, can only claim the non-refundable portion of the credit.  For this to work, the student would have to have a tax liability to take the credit against.  If the student actually has a tax liability she can claim a non-refundable credit but then the parent must forgo claiming the student's exemption and the student still can’t claim his exemption.

[sfalumberjack192]

This seems incorrect. 26 CFR 1.25A-1(f)(2) Example 2 seems to indicate that a parent can optionally choose to not claim a dependency exemption for their child. They are entitled to, but not required to. If they forego that deduction then the student can claim the educational credit and get the $1,000 refundable AOTC. The child may not be able to claim themselves on their return, so the child may not be claimed on any return. It will be interesting to see what happens in 2018 and later with the elimination of the personal exemptions.

[SweetieJean]

That example assumes that the student (not the parents) actually paid the education expenses.
"Taxpayer C has one dependent, D...D pays qualified tuition and related expenses"

None of the credit is refundable if:
(1) the taxpayer claiming the credit is (a) under age 18 or (b) age 18 at the end of the year, and their earned income was less than one-half of their own support OR (c) a full time student over 18 and under 24 and their earned income was less than one-half of their own support; AND
(2) the taxpayer has at least one living parent, AND
(3) the taxpayer doesn’t file a joint return.
<a rel="nofollow" target="_blank" href="https://apps.irs.gov/app/vita/content/globalmedia/education_credits_4012.pdf">https://apps.irs.gov/a...>

[sfalumberjack192]

Thanks for the quick reply and additional info. Makes sense now!

[dill4fam]

The key point is if the student is tax independent or not - "student's income was more than one-half of their own support". Although I have read somewhere that if the student takes a loan out in their own name (for education in this example), that IS considered "support provided by student".

[Hal_Al]

Two different rules, for two different tax attributes.
1. To be an independent, the student must have provided more than half his own support. Support from student loans, that the parents did not co-sign for, count as "support provided by student".
2. To claim the refundable  education credit, a student, under 24, must have provided more than half his support from earned income. Students loans and grants are not earned income.

[dill4fam]

1) A loan obtained by the student only (no parent cosigner) may be considered student support to be tax independent, which allows the student to claim the AOTC.
2) The requirement to obtain the AOTC "refund portion" is what requires the 50+% of support to be from earned income.

[mggflicka880]

When you say "While technically there is a provision that allows your to claim a tuition credit…” WHAT is that rule? My college student has tax liability. How can they claim a non-refundable credit? We realize no tax benefit from claiming them because of phase out. Is there any reason to still claim them?

[Hal_Al]

The $500 "Other dependent" credit  phases out at $200,000 of modified adjusted gross income ($400,000 for married couples filing jointly) compared to the old exemption phase out at $261,500 ($313,800 for married couples filing jointly).

How does he claim it? First you do not show him as a dependent on your return.  Using Turbotax, he first answers that somebody CAN claim him as a dependent. Then he answers that nobody will actually claim him. That will allow him to claim the nonrefundable tuition credit

[mggflicka880]

thank you!

[dill4fam]

This question needs a new thread as old answers are often inaccurate such as:

Original answer above: "Furthermore, there is a rule that says IF somebody else CAN claim YOU as a dependent, You are not allowed to claim your own exemption."

Exemptions are not valid anymore, only Qualifying Child and Qualifying Relative credits.

[Frank-K]

Check for updates to the CFR. Note that Example 2 cites tax year 1999 and makes reference to the Hope Scholarship Credit.

[Carl]

Take note of the date/time on the first few posts in this thread. They're identical down to the second. This indicates this thread was transferred from the old forum. Furthermore, the content of the first post indicates it was pre-2018 - well before the TCJA came into play. So all of the information in this thread is not to be trusted or believed. @TurboTaxSee flagging you on this.  This entire thread needs to be archived.

[madmanc20]

How about this scenario

- Child < 24 attending private university with $50k annual tuition. Earned $8500 for the year and used it to pay room+board (>50% of room+board cost)

- Child paid $4k of the tuition while remainder is covered by 529

- Parent does not claim child as dependent (income phased out so no benefit)

Can the child claim refundable portion of AOC? Seems to meet all the required rule

UPDATE : Nevermind, "support" include education. For a child attending private school, they would need to clear$30-$35k and use it to pay for "support" to qualify for the refundable AOC.