When it comes to claiming the dependent, you have a choice. Your daughter does not. For your daughter's return, if the parents *qualify* to claim her on their tax return, then she must select the option for "I can be claimed on someone else's return". It flat out does not matter if you claim her or not. If you just *QUALIFY* to claim her, then your daughter does not get the self-exemption.
If you the parent are claimed as a dependent on someone else's return, (assuming you qualify) then you can not claim any dependents, your own self-exemption, or any education expenses. So that would be a very costly move tax-wise.
It is common for tuition to exceed qualified expenses. Especially if tuition for the entire school year is received in the first semester. Remember, the school year crosses two calendar years. So the portion of taxable scholarship money refunded to the student in the first semester would be taxable income to the student in that tax year.
But if that money is used to pay for qualified education expenses in the 2nd semester, which is the next tax year, then the monies paid would be an out-of-pocket expense for the parents (not the student), if the parent's qualify to claim the student as their dependent in that tax year.
