You worked hard to help your child get into college. Now there are tax credits, scholarships, and loan deductions that you haven’t had to deal with before. If this is your first time filing your taxes since your child went off to college, here are some of the questions you may be asking this tax season.
What Is a Dependent for Tax Purposes?
A dependent is someone whose income and care was primarily provided by a taxpayer during the year. When filing a tax return, claiming a dependent can reduce your tax liability through deductions and credits available to taxpayers with dependents.
My child is a college student. Can I claim them as a dependent?
The IRS has a specific list of requirements that they use to determine dependent status. If your child meets these requirements and is a full-time college student, you can claim them as a dependent until they are 24. If they are working while in school, you must still provide more than half of their financial support to claim them.
Be aware that if your student meets any of the filing requirements below, they will need to file their own return. But you may still be able to claim them as a dependent even if they file their own return.
If your student is single, they are usually required to file a federal return if any of the following applies:
- They have earned income of more than $12,550
- They have unearned income from interest, dividends, or capital gains of more than $1,100
If your student is married, they are usually required to file a federal return if any of the following applies:
- They have earned income of more than $12,550
- They have gross income of $5 or more and their spouse itemizes their deductions
- They have unearned income from interest, dividends, or capital gains of more than $1,100
See IRS Publication 929 for more information on tax rules for children and dependents.
Can I claim my part-time college student as a dependent?
Yes, you can claim a part-time college student as a dependent if they meet the requirements for a qualifying dependent or qualifying child. A part-time college student can only be claimed as a dependent if they are under 19 years old.
However, the age limit for dependents is extended if your dependent is considered a full-time student. If your dependent is a full-time student, they can be claimed up to 24 years old.
Should my dependent claim education credits or should I?
By claiming your college student as a dependent on your tax return, you may be eligible for education tax credits like the American Opportunity Credit or the Lifetime Learning Credit. However, there are income thresholds for these benefits. If you exceed the income threshold, your child could still be eligible for the credit as long as you don’t claim them as your dependent.
If you have more than one child and they are only eligible for the Lifetime Learning Credit, it may be more beneficial if you don’t claim them as dependents. Learn why in our article: Education Tax Credits for College Students.
What tax forms should I receive from my kid’s college/university?
If you paid tuition or fees to the college or university for your student, they should receive an IRS Form 1098-T. It will show how much you paid or how much you were billed. It covers tuition, fees, and other expenses directly related to their courses. You can use it to calculate what tax benefits you’re eligible for if you were the one paying the fees.
Note: You may also receive a Form 1098-E from your lender if you’re making student loan payments. Once you have this form you may be eligible to take the student loan interest deduction.
Can I claim my student’s income on my tax return?
If your child’s only income is unearned income (from interest, dividends, or capital gain distributions) and it is between $1,100 and $11,000, you may choose to include that income on your return. In that case, your child would not have to file their own tax return.
Note: The amount of unearned income you report must be more than $1,100 to be included on your return. If it’s less than $1,100, your return will be rejected. If it’s more than $11,000, your student will need to file their own tax return.
If your student is employed, you should not claim their earned income on your return.
If your student files their own tax return, you can still claim them as a dependent, but you shouldn’t claim their income on your return.
Do I have to pay taxes on my child’s scholarship?
It depends. Certain scholarships are tax-free. However, you must use the money to pay for qualified education expenses. Read more on how college scholarships affect taxes here.
Are there any tax-free college savings plans?
Yes. If your child is not in college yet or if you want to start thinking about saving for your next student, you may want to consider a 529 savings plan or a Coverdell college savings account. Both grow tax-free from both federal and state income tax. And funds that are withdrawn for education purposes are not taxable.
