Usually this topic comes up when the parent is ineligible for the education credit, due to high income, and wants to student to claim it instead. Essentially that isn't allowed. But, there is an exception. Read on.
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 full time student, under age 24, is only eligible for the refundable portion of the American Opportunity Credit if he supports himself by working. She cannot be supporting herself on parental support, 529 plans or student loans & grants. She must have actually paid tuition, not had it paid by scholarships & grants. It is usually best if the parent claims that credit. She cannot claim a credit if she is, or can be, claimed as a dependent by someone else.
If she made enough income to owe tax (usually $12,000 or more), she is allow to claim a non-refundable education credit, to offset the tax owed. But, in that scenario, the parent must forego claiming her as a dependent, losing the $500 dependent credit plus an up to $2500 education credit, if eligible. Essentially the student must have more than $17,000 of income for this move to break even.
With the tax law change, effective 2018, most students will get the same refund whether they claim themselves or not (except if they have investment income). The personal exemption has been eliminated and the standard deduction increased.
