Tuition

[Bilmar]

I pay some of my granddaughters tuition.  Is any of it tax deductible?  I take standard deduction. I do not itemize. 

[NateTheGrEAt]

Hi @Bilmar and thanks for writing in with your question today! 

You are a very kind grandparent to support your granddaughter's educational journey. However, you would only be able to receive a tax benefit for directly paying her tuition in limited circumstances - specifically, if you claim your granddaughter as a dependent on your tax return. 

The granddaughter might be eligible to claim education credits, either the American Opportunity Credit or Lifetime Learning credit, based on her attendance at college. Those credits would be claimed by her on her own tax return if she files as a non-dependent taxpayer. If someone claims her as a dependent, that person would claim the credits on their return. So, for example, if your child (the granddaughter's parent) claims the granddaughter as a dependent, they would get the education credits. 

The Tuition and Fees deduction was permanently repealed for tax years starting in 2021 and beyond so this is no longer available. 

One option you could look into which might provide a limited tax benefit would be to fund a 529 Plan (College Savings Plan) for your granddaughter. You could put money in and, depending on your state and your income level, possibly receive a state tax deduction. Then your granddaughter could withdraw the funds and use them for tuition. Here is a great TurboTax article about 529 plans. 

I hope this information is helpful!

[Opus 17]

For any of the possible tax benefits (except a 529 plan) you would have to be claiming her as a tax dependent.  However, if she is not a dependent of anyone else (such as her parents), then she can claim the tax benefits as if she paid with her own money.   (This is the only time I can think of where one person can claim a tax benefit for an expense paid by a second person.)

Contributions to a 529 plan are not tax-deductible on your federal return but are often deductible on your state taxes (but this may depend on whether the child's school is located in state or out of state).  Earnings are tax-free if used for qualified educational expenses.