Education credit for non-dependent?

[dwhewlings]

My daughter turned 24 in Dec 2018 and is in her junior year in college. I pay all of her college expenses. She exceeded the dependent income maximum by just a few hundred dollars, so I can no longer claim her as a dependent, and as a result I don't qualify for the education credit. Can she claim that credit on her own return? Thanks for your help.

[Ashby · Accepted solution]

Yes, she can.

[dwhewlings]

She can claim the credit even though she did not pay her own college expenses? I paid them, not her.  thanks

[Ashby]

Yes, does not matter. The form is in her name so she can claim.

[dwhewlings]

I forgot to mention that I used her 1098-T on my own return to offset an earnings distribution on the 1099-Q from a 529 account. Does that make a difference? thanks again

[Ashby]

I'm a little confused on this one. Was she the beneficiary of the 1099-Q? If so, and she is not a dependent, the 1099-Q and the 1098-T would be reported on her return.

[dwhewlings]

Thanks for your patience. Yes, she is the beneficiary on the 529 account. When she was a dependent, I reported both forms on my return. Now that she's not a dependent, both get reported on her return; is that correct? If so, how do we avoid the IRS coming after me for the earnings distribution, given that my SSN is on the 1099-Q? thanks

[Bsch4477]

Yes, she can claim it on her own.

[RDKennedy01]

My step son is also not a dependent- and has never lived with me,  but I paid off his student loans.

Can I deduct this and which tax program should I use?

[Hal_Al]

Simple answer: No.

The event of paying off a student loan is not deductible by anyone.  

Only the interest paid on a student loan is deductible.  You cannot deduct that interest, even though you paid it, since you were not legally obligated to do so.  There might be one exception: if your spouse co-signed the loan with his/her son and you file a joint a return with your spouse.

Your stepson may deduct the interest you paid, under the theory that you paying it was a gift to him and it really was him paying it.

If educational expenses were paid with loan money, in 2020, those expenses qualify for the student (or whomever claims him as a dependent) to claim an education credit