delay paying graduation year college tuition on Jan 1 2025 instead of Dec 30 2024 to get additional 1098-T to claim Life Time Learning Credit

[masonparent]

Hello Experts,

Thanks in advance for your help!

My daughter started college 2021 and will graduate 2025, I plan to claim American Oppurtunity Tuition Credit for 2021 to 2024 for maximum of four years. In order to claim Life Time Learning Credit in 2025, I need to  delay paying graduation year college tuition to Jan 1 2025 instead of Dec 30 2024 to get additional 1098-T. Since only tuition qualifies for both credit.

The college requires to pay spring 2025 tuition on 12/30/2024 but won't charge late fee till 1/6/25 so I can pay on 1/1/25 to avaid the late fee.

Is this possible?

Thanks so much!

[Hal_Al · Accepted solution]

Q.  In order to claim Lifetime Learning Credit (LLC) in 2025, I need to  delay paying graduation year college tuition to Jan 1 2025 instead of Dec 30 2024 to get additional 1098-T.  Is this possible?

A. Yes. 

There's a chance the school my still include the billed tuition on the 2024 1098-T and not issue a 1098-T for 2025.  But, that will not prevent you from claiming the LLC on your 2025 taxes. You meet the exception rule for not having a 1098-T. 

What may prevent you from claiming the LLC is if your daughter is no longer your dependent for 2025. In that case, she will claim the LLC, even if you were the one who paid the tuition. That is allowed. 

Can the student be claimed as a dependent in the Graduation year? (answer written as if the parent asked the question)

If he/she was a student (under 24) for at least 5 months and lived with you for more than half the year, and did not provide more than 1/2 his own support for the whole year, you can still claim him. Be sure he knows you're claiming him, so he doesn't claim himself. He can only be claimed once. But, he can "file taxes" without claiming his own exemption.

The real question is who should be claiming him in this "transition" year to adulthood. You two have to agree on who is going to claim his exemption. Each should do their taxes both ways and see which way the family comes out best.  Even then, you have to meet the rules. 

There are two types of dependents, "Qualifying Children"(QC) and Other ("Qualifying Relative" in IRS parlance even though they don't have to actually be related). There is no income limit for a QC but there is an age limit, student status, a relationship test and residence test. Only a QC qualifies a taxpayer for the Earned Income Credit.

The rule is that a child of a taxpayer can still be a “Qualifying Child” dependent, regardless of his income, if:

1. he is a full-time student under 24 for at least 5 calendar months of the year (graduating in May usually means you meet the 5 month rule)
2. he did not provide more than 1/2 his own support  (scholarships are considered 3rd party support and not support provided by the student). 
3. lived with the parent (including time away at school) for more than half the year

So, it usually hinges on "Did he provide more than 1/2 his own support in 2025.

The support value of the home you provided is the fair market rental value of the home plus utilities & other expenses divided by the number of occupants. IRS Publication 501 on page 20 has a worksheet that can be used to help with the support calculation. See: http://www.irs.gov/pub/irs-pdf/p501.pdf  (page 15)

[masonparent]

Thanks so much @Hal_Al , you also helped me before, you help is very muh appreciated! Have a great weekend and thanksgiving!

[masonparent]

Thanks again for the great answer!

[masonparent]

@Hal_Al 

Happy New Year!

Thinking about this again it seems to take LLC this year (instead of next year) and AOTC next year will get me the most for the two years. I already paid her tuition $7000 in August, and will pay the $3000 in Jan 2025 for her graduation year. If I use AOTC this year and LLC next year I will get $2500 AOTC this year and $600 LLC next year total $3100. 

If I use LLC this year I will get $1400 this year and $2250 next year, total $3650.

LLC is 20% of up to $10,000 tuition. AOTC is 100% of first $2000 and 25% of next $2000.

AOTC does not have to be taken in consecutive years.

Is this possible?

Thanks again!

[Hal_Al · Accepted solution]

Q. If I use LLC this year I will get $1400 this year and $2250 next year, total $3650. Is this possible?

A. Yes. that's a good plan.  AOTC does not have to be taken in consecutive years.

[masonparent]

Thanks so much for your great help!

[masonparent]

Greetings!

I just got my 2024 1098-T. I am wondering what the 2025 1098-T will look like, since I won't have any tuition billed for 25 and this is the year kid will graduate(it was billed in 24), but I do have a delayed payment in 25. If no tuition but only payment for previous year tuition, can I still get lifetime learning credit?  Thanks in advance!

[Hal_Al]

Q.  I am wondering what the 2025 1098-T will look like.

A. You, most likely, will not get one.

Q.  If no tuition but only payment for previous year tuition, can I still get lifetime learning credit?

A. No. Payment must be for the current year expenses. The only exception is: you are allowed to count a payment, made in the current year, for a term starting in Jan. - Mar. of the following year. 

Although, it's not clear why you would have made a payment for 2025 tuition, in 2024, but still have unpaid 2024 tuition? If you mean you delayed paying the December billing, for 2025 tuition, until 2025, then you may get a 2025 1098-T. It depends on how the school does things.  But, even without a 1098-T, you can still count the 2025 payment (for 2025 expenses) for a 2025 tuition credit. 

[masonparent]

thanks for your prompt response. Yes my payment in 2025 was for a bill in December 2024. Its deadline was 12/30/24 but I delayed pay till 1/1/25. So plan to get credit for another year in 25.  

[Hal_Al]

In order for YOU to get the credit in 2025, she will still need to be your dependent in 2025.  If she isn't, she can claim the credit on her return, even if you paid the expenses. 

Can the student be claimed as a dependent in the Graduation year? 

If he/she was a student (under 24) for at least 5 months and lived with you for more than half the year, and did not provide more than 1/2 his own support for the whole year, you can still claim him. Be sure he knows you're claiming him, so he doesn't claim himself. He can only be claimed once. But, he can "file taxes" without claiming his own exemption.

The real question is who should be claiming him in this "transition" year to adulthood. You two have to agree on who is going to claim his exemption. Each should do their taxes both ways and see which way the family comes out best.  Even then, you have to meet the rules. 

There are two types of dependents, "Qualifying Children"(QC) and Other ("Qualifying Relative" in IRS parlance even though they don't have to actually be related). There is no income limit for a QC but there is an age limit, student status, a relationship test and residence test. Only a QC qualifies a taxpayer for the Earned Income Credit.

The rule is that a child of a taxpayer can still be a “Qualifying Child” dependent, regardless of his income, if:

1. he is a full-time student under 24 for at least 5 calendar months of the year (graduating in May usually means you meet the 5 month rule)
2. he did not provide more than 1/2 his own support  (scholarships are considered 3rd party support and not support provided by the student). 
3. lived with the parent (including time away at school) for more than half the year

So, it usually hinges on "Did he provide more than 1/2 his own support in 2025.

The support value of the home you provided is the fair market rental value of the home plus utilities & other expenses divided by the number of occupants. IRS Publication 501 on page 20 has a worksheet that can be used to help with the support calculation. See: http://www.irs.gov/pub/irs-pdf/p501.pdf  (page 15)

[masonparent]

For the first half of the year she has no salary done she is still student. For the second half of year she will have salary but will live with us since employer is local. We do not plan to ask her to pay anything even if she can afford. In that case can we claim her as a dependent? Thanks.  

[Hal_Al]

Q.  We do not plan to ask her to pay anything even if she can afford. In that case can we claim her as a dependent? 

A. Probably.  But, you may still have to do the math. Almost everything she spends money on counts as support for herself.  Money she puts into savings and investment does not.

[masonparent]

Thanks so much for your help!