@ProffieJoe
With the tax law change, effective 2018, most students will get the same refund whether they claim themselves or not. The personal exemption has been eliminated and the standard deduction increased. However, he only qualify for an education credit, if he is not a dependent.
While technically there is a provision that allows your student-dependent to claim a federal tuition credit, from a practical matter it seldom works out. A student, under age 24, is only eligible for the refundable portion of the American Opportunity Credit (AOTC) if he/she supports himself by working. She cannot be supporting herself on student loans & grants and 529 plans and parental support. It is usually best if the parent claims that credit.
If the student actually has a tax liability, there is a provision to allow him to claim a non-refundable tuition credit. But then the parent must forgo claiming the student as a dependent, and the $500 other dependent credit. The student must still indicate that he can be claimed as a dependent, on his return. This is worth up to $2500 (AOTC shifts to all non refundable).
Q. So, should I still be able to do the workaround?
A. Yes, the student can do it, if the parent is not claiming the tuition credit.
Q. I also have a son in Grad school whose tuition and scholarship money (Box 1 and Box 5) are nearly the same. Can I do the same thing for him (determine how much of Box 1 can be used for tuition and the rest income).
A. Yes. Grad students are not eligible for the AOTC, but can get the very less generous Lifetime Learning Credit (LLC). The LLC is 20% of tuition paid, up to $10K. Books and a computer are not eligible expenses. The LLC is 100% non refundable.
