Tax deductions

[davidc01]

I file married jointly with two children. One of them is a college student and is eligible to be claimed on my return or could file her own return. When I remove her as my dependent, the child credit is reduced by $500, but my tax amount owed goes up by $3,000. I can't figure out why such a difference with only the one change made.

[HelenC12]

When you remove your college student, you may not be getting the:

• Education credit (American Opportunity or the Life Time Learning) and/or,
• if you qualify for the Earned Income Tax Credit, you may lose the credit for your college student and/or
• you lose the $1,400 stimulus payment for her.

Related information: Sending Kids to College

[davidc01]

Thank you so much for your reply. Just a follow up to the questions:

From what I recall, when the stimulus money was sent out, the dependent amounts were calculated based on 2020 tax filing. Why would they now "take back" some of those funds based on the  2021 tax situations?

If the college finances on Form 1098-T was sent in my child's name but I actually spent my money for those expenses in Box 1, how can I get the credit?

[Vanessa A]

They aren't taking back the stimulus, what you are seeing is a removal of one of the people who you are claiming a stimulus for.  However, be sure you did not already receive a stimulus payment for your college age student before claiming it on your return.  The IRS will catch this and remove it on your return when you do submit if you claim it when you already received it.

You enter her 1098-T on your return.  Since she is a dependent, you get to claim her education expenses for the education credits even though her name is listed on the 1098-T.