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Level 2
posted Feb 19, 2024 8:38:42 AM

Should claim college student as dependent or not?

Parents return

  1. ineligible for education credits due to income limits
  2. $0 Child tax credit or credit for other dependents from Schedule 8812

College student return

  1. has qualified college expenses in excess of Coverdell/529 distributions
  2. has about $17k earned income, with taxes withheld; so need to file return to get refund
  3. can be claimed as dependent; therefore, ineligible for refundable portion of AOTC

Any tips about pros and cons of NOT claiming the student as dependent on parents' return?

 

Pros:

  1. Possibly get AOTC credit on student federal return?

Cons:

  1. No cons for parents' federal return?
  2. Losing dependent exemption on parents NJ state return?

 

Thanks!

 

0 2 3283
1 Best answer
Level 15
Feb 19, 2024 9:34:37 AM

The credit for other dependents begins to phase out when the taxpayer's income is more than $200,000. This phaseout begins for married couples filing a joint tax return at $400,000.

 

You are allowed to forgo claiming your dependent so that he can claim the non refundable portion of the AOTC. That saves him all his tax (about $315) on the federal return.  But it uses up one the 4 allowable AOTC.  If there's no chance of collecting a bigger AOTC in the future, that shouldn't be a problem. He could/should claim the Lifetime Learning Credit (LLC) instead. The LLC only takes about $1600 of qualified expenses to get the same $315 credit. 

2 Replies
Level 15
Feb 19, 2024 8:42:40 AM

The rule for your dependent is that if they CAN be claimed as a dependent they MUST say on their own return that someone else can claim them.  They must answer truthfully even if you choose not to claim them.  Dependents cannot get education credits.    If you cannot get the education credit due to your income---that is the way Congress wrote the tax law.    You might as well claim your child and at least get the $500 credit for other dependents.   

Level 15
Feb 19, 2024 9:34:37 AM

The credit for other dependents begins to phase out when the taxpayer's income is more than $200,000. This phaseout begins for married couples filing a joint tax return at $400,000.

 

You are allowed to forgo claiming your dependent so that he can claim the non refundable portion of the AOTC. That saves him all his tax (about $315) on the federal return.  But it uses up one the 4 allowable AOTC.  If there's no chance of collecting a bigger AOTC in the future, that shouldn't be a problem. He could/should claim the Lifetime Learning Credit (LLC) instead. The LLC only takes about $1600 of qualified expenses to get the same $315 credit.