@Ognak1 wrote:
Ok, can her mother and I take turns claiming her as a dependent?
Also, can I claim the tuition deduction even though she isn't my dependent?
LOL...I'm just trying to find any tax credits I can in this scenario. I am giving my daughter approximately $1000 a month in support of her going to school.
Let's take a step back.
Under the "special rules for children of divorced or separated parents," a child is not considered to live with either parent once they are of legal age (18 in most states). That means that the "qualifying child" type of dependent is disallowed, since that requires the child to live with one of the parents. Only the "qualifying relative" type of dependent is allowed. To claim a child as a qualifying relative dependent, the parent must pay "more than half" the child's support. Remember that money the student earns in their own name, as well as student loans in the student's name, count as support the student provides themself. So you may find that even if you pay 45% of the student's support and the other parent pays 45%, then the student provides 10% of their own support. In that case, no one can claim the child as a dependent because no one paid more than half.**
So going back to your original questions.
1. You can give someone up to $15,000 per year for any reason. If you give more than $15,000, you must report the gift to the IRS on a form 709 Gift Tax Return. No tax is actually owed unless your lifetime gifts to all people are more than $11 million, but the IRS uses form 709 to keep track of your gifts. Form 709 is due the same time as your regular tax return (April 15) but is a separate form and is not part of your regular tax return. Turbotax does not include this form.
2. You can only deduct student loan interest if you are the borrower, or the borrower was your dependent when the loan was made. (You also have to actually be the person who pays the interest.) Because she probably can't be your dependent, you can't deduct loan interest even if you paid it and you are a co-signer. However, if you do make loan payments, your child can deduct the interest you paid as if she paid it directly. This is not normally true of loan interest but is a special rule for student loans. (Since student loans don't generally go into repayment until the student graduates, there's probably nothing to deduct now anyway. The existence of a loan is not deductible, just interest paid.)
3. You don't gain a tax benefit for educational expenses you pay for, because she isn't your dependent. She can include books and other expenses you paid for on her tax return as if she paid for them.
**There is a rule that if no one pays more than half, everyone who pays more than 10% of the person's support could sign a multiple support agreement in which they agree on which person (who paid more than 10%) can claim the dependent. To claim her as a dependent you would need her signature and the other parent's signature on a multiple support agreement. However, the child's tax benefit and financial aid benefit to being independent is probably much larger than your benefit to claim her as a dependent. Having your child be able to legally answer "no one can claim me as a dependent" on her tax return will probably result in the largest overall financial benefit to her and your family.
