Education Credit

[Christian]

A couple with a daughter in college has come in with the 1098-T form from her college. The daughter works and made about $10,000 last year and of course lives at home and is their dependent. She wanted to take some additional courses not offered by her college and paid the tuition for the courses herself and received a 1098-T from that college. My question is do her parents take an education credit for both institutions. In looking at Form 8863 I would assume they can but this being the first time I have had this situation to arise I thought it prudent to get more info. 

[mcb39]

It is my understanding that the tuition credit follows the exemption; regardless of who actually pays it.

[gfizer]

Whoever claims the dependent will claim the education credit regardless of who pays the tuition costs.  You will just enter 2 1098T forms on the education expense worksheet.

[Randall]

If child earns about $20k, but still lives with parents, can the child claim herself as not a dependent?  Is it a matter of choosing or will I (or they) have to determine the support allocation (50% or more supporting herself)?  My situation is that parents took some money out of a 401 and this amount puts their income over the limit to claim the education credit.  But the child may be able to do so if she is not a dependent.  Still seems like a dependent to me.

[TexTaxToo]

On 2/4/2025 at 2:50 PM, Christian said:

My question is do her parents take an education credit for both institutions.

Just to be clear, there is one AOC per student, not per institution.  You total the expenses for all instututions to claim the credit.  There is room for two institutions on Form 8863 - add more if needed.  For the LLC, there is one credit per tax return, regardless of the number of students or institutions.

2 hours ago, Randall said:

Is it a matter of choosing or will I (or they) have to determine the support allocation

There is no choice as to whether someone can be claimed as a dependent - the support worksheet is needed.  There is a choice as to whether someone is claimed as a dependent.  The AOC is a bit unusual in that someone who can be claimed as a dependent but is not so claimed can still claim the AOC for themselves - at least the non-refundable part.  For the refundable part, you must follow the rules for the kiddie tax, which are similar to but not the same as the rules for dependency.  See the instructions for line 7 of Form 8863.

[Randall]

30 minutes ago, TexTaxToo said:

Just to be clear, there is one AOC per student, not per institution.  You total the expenses for all instututions to claim the credit.  There is room for two institutions on Form 8863 - add more if needed.  For the LLC, there is one credit per tax return, regardless of the number of students or institutions.

There is no choice as to whether someone can be claimed as a dependent - the support worksheet is needed.  There is a choice as to whether someone is claimed as a dependent.  The AOC is a bit unusual in that someone who can be claimed as a dependent but is not so claimed can still claim the AOC for themselves - at least the non-refundable part.  For the refundable part, you must follow the rules for the kiddie tax, which are similar to but not the same as the rules for dependency.  See the instructions for line 7 of Form 8863.

Interesting clarification.  I'll have to look into it further.

[Randall]

On 2/11/2025 at 9:26 AM, TexTaxToo said:

Just to be clear, there is one AOC per student, not per institution.  You total the expenses for all instututions to claim the credit.  There is room for two institutions on Form 8863 - add more if needed.  For the LLC, there is one credit per tax return, regardless of the number of students or institutions.

There is no choice as to whether someone can be claimed as a dependent - the support worksheet is needed.  There is a choice as to whether someone is claimed as a dependent.  The AOC is a bit unusual in that someone who can be claimed as a dependent but is not so claimed can still claim the AOC for themselves - at least the non-refundable part.  For the refundable part, you must follow the rules for the kiddie tax, which are similar to but not the same as the rules for dependency.  See the instructions for line 7 of Form 8863.

Are you saying that the child who doesn't provide 50% of her support can claim the non-refundable portion of the education credit?  When I input this in ATX, I have to uncheck the box that says someone else can claim her.  Her total tax is $863 which she then gets a credit for.  But then I have to show the child on the parents' return as NOT claiming the child.  Then their refund is reduced by the $500 for the child credit.  Net savings is $363.  Is this correct?

[Lion EA]

If the parents are eligible to claim the child but do NOT claim the child, then the child still is NOT able to claim herself but CAN claim the non-refundable part of AOC.

How you enter that in your software, I don't know because I don't use ATX. Someone here will tell you, or contact your tech support.