Just because I can claim a college son/daughter do I need too? They live on campus and i provide rent but that could be a gift. I don't get any benefit claiming them.

[Hal_Al]

Why are you asking that question? what are you thinking?

For example, some parents think that not claiming their student allows their student to claim a $1000 refundable tuition credit on the student's return. It ain't so; it's an urban myth

[Opus 17]

No, you don't.  But...

The first key point is that if your child can be claimed, they must check the box saying they can be claimed, if you aren't going to claim them.  This makes them ineligible for a number of tax benefits.  So most of the time, it is better for you to claim them because then at least someone gets a benefit.  If they don't check that box, as if they were independent, they might qualify for more financial aid and tuition credits, but if audited or discovered, they might have to pay it all back plus be barred from future claims.

The second point is that, specifically regarding the American Opportunity Credit, there is a circumstance where, if your income is too high to claim the credit, you can decide to not claim your child as a dependent, and your child can claim a partial AOTC credit.  They would check "yes" for the question "can someone claim you as a dependent" but then would answer "no" to the followup question, "will that person actually claim you this year." The AOTC is that case is limited by several factors but some credit may be better than no credit, if you are income-limiteded out of the credit yourself.

If you are not income-limited out of the credit, there is very little reason not to claim your child as a dependent if he or she qualifies.

[daherbie]

Thanks - i have too much income for AOTC or LLC.  With the elimination of the personal exemption and higher std deduction I will use married filing jointly w/ std deduction (24k) and I don't think i get any benefit having my son and daughter as dependents.  They can file for LLC or AOTC or tuition and fee deduction and lower their taxes (both work; my son also graduated in May and worked full time in the summer through Oct).  I was thinking the support i provided for them in terms of Room/Board(food) and any tuition could be considered tax-free gift (30K each from their mother and I) and then i didn't support them and they are independent?  Not sure what any benefit of claiming them is or how IRS looks at this.

[Opus 17]

No, you can't diddle the definition of dependent that way.  Of course, it's not your issue, you can definitely not claim your child if you don't want to.  It's your child who gets in trouble, or not, for checking the box, or not.

If your child has income from working, then if they check the boxes for "I can be claimed as a dependent" and "the person who could claim me won't claim me" they may be eligible for some of the AOTC.

[Hal_Al]

There is a special rule that allows you to forgo claiming the student as a dependent and the student is then allowed to claim the NON refundable portion of the AOTC  or the LLC  (the TFD has not been renewed for 2018). But since they are non refundable, the student would have to have a tax liability for that to be of any benefit. You would lose the $500 dependent credit.  They still can't claim themselves, but with the elimination of the personal exemption and the higher standard deduction ($12K single*) , that's not as important as it used to be.

*the standard deduction for someone who can't claim himself is limited to the lesser of $12K or his earned income + $350

[daherbie]

Thanks - That's a lot of useful info!   So - Tuition and Fee deductible not available at all in 2018.     The new $500 credit for other dependents that doesn't start to phase out til 200K is new news for me so i do have some benefit to weigh here I wasn't aware of.  The higher standard deduction will hopefully keep them from owing much if anything but one graduated in May and then worked so I have to see where he sits yet to see which way to go.  

[tomatillo]

So does non-refundable mean they can only get the partial AOTC credit if they owe at least that amount in taxes?

[Hal_Al]

Yes.

[tmorriss]

Thank you for the detail answers.

To clarify:

if your income is too high to claim a dependent credit, 

and your child will not owe taxes because they won't earn enough to owe,

is it OK to NOT claim the child so that they can indicate that they will not be claimed on anyone else's taxes, 

so that they might claim the AOTC? 

if they won't owe taxes, am I understanding correctly that they cannot receive the refundable portion of the AOTC? why is this?

(there seems to be no benefit to me in claiming the child as a dependent, so if the child could get the refundable portion of the AOTC by saying they aren't going to be claimed on my taxes, that would be an overall benefit). Thank you

And again, just because I CAN claim the child doesn't mean I must?

[Mike9241]

the tax law is not whether they WERE claimed but whether they COULD be claimed. so if you COULD claim them they must indicate this on their return despite the fact that you don't claim them.    

if a dependency deduction for an individual is allowed or allowable to another taxpayer (you), the dependent can't claim the AOTC, and any QT&R expenses paid by the dependent are treated by the person who is allowed the deduction IRC Sec 25A(g)(3)

although the dependency exemption is suspended from 2018 to 2025 IRC SEC 151(d)(5)(B) provides that the suspension isn't taken into a/c in determining whether a deduction for personal exemptions is "allowed" or "allowable". so a student for whom a taxpayer (you) could,  but for the suspension, claim a dependency exemption, can't claim the AOTC  

in short, whether you claim him or not, he can't take the credit because he qualifies as your dependent. 

[NCperson]

Simply, you are not required to claim your children as your dependents for tax purposes.

HOWEVER, and this trips a lot of young people up, from THEIR perspective, there is a question on the tax return that asks CAN someone else claim them?  So they have to answer "yes" regardless of your action! 

The IRS was smart enough to ensure that your decision doesn't confer any benefits on your children. For example, they are not eligible for the stimulus payments because you CAN claim them; whether you do is immaterial to the IRS.