<p>I did some preliminary seaches on CC - because this seems like a question that has been asked many times before. I did not find any obvious threads, so I will ask away. If there are obvious threads, please list them for me, and accept my apologies for posting the question, yet again. Thanks.</p>
<p>Someone at work mentioned to me today that some amout of college tuition can be applied to our 1040 Tax Return (either as a Tax Credit, or an itemized deduction). Since this will be our first child in college next year, I have never had to explore this option on prior year's tax returns. </p>
<p>Does someone/anyone know the current tax laws regarding college tuition.</p>
<p>I am not referring to 529s, or Coverdell accounts, etc.</p>
<p>This question assumes a family with no college savings accounts (529, coverdall, etc.), that pays full tuition at a school that costs over 40k per year.</p>
<p>I am guessing ahead of time, that the answers will range from
(a) no tuition is deductible anywhere anytime.
(b) yes, some tuition is deductible, but it depends upon income level, etc.
(c) yes, all tuition is deductible, income has no influence.</p>
<p>Unlikely that "c" is the answer. More likely that "b", or "a" is the answer.</p>
<p>If your filing status is married filing jointly (MFJ), you are eligible for tuition tax breaks if your gross income is below $160K, but the benefits begin to phase out once your income reaches $130K. (If filing status is anything other than MFJ, the corresponding income limits are cut in half.)</p>
<p>There are three different options:</p>
<p>1) Tuition deduction--you can deduct up to $4,000 in tuition payments as "adjustment to income" which reduces your AGI and ultimately your taxable income.</p>
<p>2) Hope Tax Credit--you can claim a dollar for dollar credit for the first $1,000 of tuition paid and fifty cents on the dollar credit for the second $1,000 of tuition paid. This is a CREDIT, which directly offsets your tax liability. (Option only available for students in first two years of college and only if student is attending half-time or more.)</p>
<p>3) Lifetime learning credit--20 cents on the dollar credit on the first $10K of tuition paid. Student can be in any year of college and does not have to be attending full-time. </p>
<p>There are complicated rules to prevent double-dipping. Which deal is best depends in part on your tax bracket, on how much tuition you are paying, on how many children you have in college at once (because you may be able to take Hope on one student and Lifetime Learning on the other.)</p>
<p>Many complicated ins and outs--it's worth spending some time reading this publication:</p>
<p>Also be aware of the tax ramifications at the state level. The deduction I took on my federal tax reduced my 1040 line 37 income - which is what is used to calculate my state income tax. Taking the Hope or LL would not have helped with my state taxes. I believe that the deduction is going away next year, however. Drat.</p>
<p>Doesn't the child (student) have to be a "Dependant", for the parents to qualify for those deductions? And, if they are in school for 9 months of the year, doesn't that disqualify them from being a dependant?</p>
<p>Qualifying child. To be your dependent (defined earlier), a person must be either your qualifying child or your qualifying relative (defined next). Generally, a person is your qualifying child if that person: </p>
<p>Is your child, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them,</p>
<p>Lived with you for more than half of the year,</p>
<p>Did not provide more than half of his or her own support for the year, and</p>
<p>Was under age 19 at the end of the year (or was under age 24 at the end of the year and a student, or was any age and permanently and totally disabled). </p>
<p>For details, see Exemptions for Dependents in Publication 501.</p>
<p>**Residency Test: To meet this test, your child must have lived with you for more than half of the year. There are exceptions for temporary absences, children who were born or died during the year, kidnapped children, and children of divorced or separated parents **</p>
<p>Let me be clear. I DO want any and every available Tax credit or deduction that is available to me as the parent. However, I also DO want to be within acceptable IRS guidelines. I guess I am waiting for somone to say that my information is incorrect. That, in fact, the deductions are valid for me (and other parents) even though our kids are away in college.</p>
<p>Can we claim the Hope, the Lifetime, or the Tuition Credit - if our children are not living with us for more than 1/2 the year?? </p>
<p>3) Take College Credits! If you are struggling to pay for kids in college, there are two tax credits available to help you offset the costs by reducing the amount of your income tax. They are the hope credit and the lifetime learning credit. You cannot claim both credits for the same student in one tax year, and the credit can be claimed only on the return declaring the student as a dependent. How much you get from each depends on your adjusted gross income.</p>
<p>The Hope Scholarship - gives eligible parents a tax credit of $1,500 per child for tuition during the first two years of college.</p>
<p>The Lifetime Learning Credit gives eligible parents a tax credit of up to $2,000 for qualified education expenses for all students enrolled in eligible institutions.</p>
<p>The Hope Tax Credit
This tax credit applies to tuition and fee expenses for the first two years of post-secondary education.</p>
<p>To claim Hope credit, the student must be enrolled at least 1/2 time for at least one academic period.
The maximum yearly credit per eligible student is $1,500.
There is no limit on how many family members can receive the credit.
The amount of the credit begins to phase out if your modified adjusted gross income (MAGI) is between $41,000 and $51,000 for a single return and between $82,000 and $102,000 for a joint return.
*For your parents to claim a Hope credit for your expenses, your parents must also claim an exemption for you. If your parents do not claim you as an exemption, you yourself can claim the Hope credit. *
You claim the Hope credit by completing Parts I and III of IRS Form 8863, entering the education credit figure on your 1040 or 1040A, and submitting it with your tax return.</p>
<p>LTC, there are exceptions for college students living more than 6 months away from home. Check the dependency rules on the IRS site. It is easier to follow the examples by reading the publications after printing them. </p>
<p>Full-time student. A full-time student is a student who is enrolled for the number of hours or courses the school considers to be full-time attendance.</p>
<p>Student defined. To qualify as a student, your child must be, during some part of each of any 5 calendar months of the year:</p>
<ol>
<li> A full-time student at a school that has a regular teaching staff, course of study, and a regularly enrolled student body at the school, or</li>
<li> A student taking a full-time, on-farm training course given by a school described in (1), or by a state, county, or local government agency.</li>
</ol>
<p>Actually it is MUCH harder to qualify as a non-dependent for tax purposes.</p>
<p>Do you parents, who have children in the 2nd, 3rd, 4th years of college, and those children are living in dorms (or at least not living at home). Do you still go ahead and claim them as depedants anyway?</p>
<p>I don't mean to stir up a hornet's nest, but i am genuinely confused about this.</p>
<p>It doesn't sound like you can claim them, if they are away from home for more than 6 months...?</p>
<p>Agreed, childern who are away at college are considered to be living with the custodial parent(s). Imagine if you were an out of state student and changed residency twice a year, once in the fall and again after classes finished in the spring. Driver's license, voter registration.....those agencies would go nuts processing forms, only to re-process them again.</p>
<p>xiggi, thanks for the post. Your post must have been submitted at about the same time as mine. I will look at the examples (at the IRS site) for more details. Any Accountants, or Paid Tax Preparers, who care to chime in. Your input is welcome as well.</p>
<p>A student with a full-ride scholarship has all his expenses covered by a scholarship. In the eyes of IRS, parents do not support him/her. </p>
<p>If parents choose not to claim their child as a depedent (with all tax' consequences), can a student claim any of above mentioned credits for himself? WOuld the level of credits be determined by a student's income?</p>
<p>You have to file as income the amount of money that is ABOVE tuition, fees on your tax forms - in other words, you have to file as income the amount that goes towards room, board, and extras. A kid is still considered a dependent even when living away from home for extended periods of time - due to his "student" status.</p>
<p>"A student with a full-ride scholarship has all his expenses covered by a scholarship. In the eyes of IRS, parents do not support him/her. </p>
<p>"If parents choose not to claim their child as a depedent (with all tax' consequences), can a student claim any of above mentioned credits for himself? WOuld the level of credits be determined by a student's income?"</p>
<p>I am not sure how the two statements are related, but a student who has a full-ride scholarship should not worry about credits. He does NOT pay anything, so he could not claim credits. On the other hand, he will owe taxes on the portion of the scholarship income that is not excludable. </p>
<p>FWIW, scholarship income is excluded for the dependency tests used by parents to CLAIM their dependents. </p>
<p>That CHOICE is very limited. The facts dictate if the student is either a depended (almost always) or could be considered independent (more rarely.)</p>