More College Questions

[FourBees]

So these questions are for all you parents of college students out there that have become experts or any accountants.

1) Who claims the American Opportunity tax credit on their taxes, the parents or the student?

2) Who claims the money (grants and scholarships) that was given to the student that is in excess of what is allowed for tuition and books and expenses?

3) Is your child still considered your dependent? If not what determines whether or not they are considered a dependent?

I am very confused about these questions. I have googled these questions but the more I read the more confused I seem to get. Any input would be appreciated and maybe this will help someone else out that has the same questions.

 

[Jeninindy]

So these questions are for all you parents of college students out there that have become experts or any accountants.

1) Who claims the American Opportunity tax credit on their taxes, the parents or the student?

2) Who claims the money (grants and scholarships) that was given to the student that is in excess of what is allowed for tuition and books and expenses?

3) Is your child still considered your dependent? If not what determines whether or not they are considered a dependent?

I am very confused about these questions. I have googled these questions but the more I read the more confused I seem to get. Any input would be appreciated and maybe this will help someone else out that has the same questions.

If your child is self supporting and lives on their own, they are not your dependent.

If you child is living in your home and you are providing the majority of their support and they are unmarried they are your dependent in the eyes of the FAFSA form.

If you can claim the child as a dependent on your tax return, you have to be the one who takes the tax credit.

If your child receives grants/scholarships in excess of tuition/books, they have to claim it as income on their tax return. Additionally if your child received grants/scholarships in excess of tuition/books, you won't be eligible to take any tax credits as no tuition has been paid. Your student will get a tax form shortly (my son's will be available by Jan 17th) which shows the amount of scholarships/grants and what the actual tuition deduction amount allowed is (doesn't include the book information though).

As always, contact your tax advisor - we are just faces on the internet and could be mistaken..

Here's a link to the fafsa dependency information page: http://www.fafsaonline.com/fafsa-form/dependent-status-for-fafsa-5.php

 

[tar heel]

If your child is getting grants and scholarships that are specifically for tuition and fees that are more than the bill, I think you're out of luck. If they could be used for rent, food, etc., and actual money is being paid for tuition and fees, you may be in luck. A statement from the college will be available and it will acknowledge scholarships that the university has anything to do with.

For us, our child is clearly still our dependent since we provide more than 1/2 his upkeep. He works part-time, but his dependency status and the college credit are worth much more in our tax bracket than his. We continued to claim our older son for one more year the year he graduated. Read the rules here: http://www.irs.gov/newsroom/article/0,,id=133298,00.html

 

[imsayin]

If you can claim the child as a dependent on your tax return, you have to be the one who takes the tax credit.

Actually, the child can take the tax credit if the parent foregoes the dependency exemption. In this case, no one gets the dependency exemption. In certain instances, this makes financial sense, thus the need to know what you are doing or have a tax preparer run the numbers for you.