Tax Credit for Dependent Children in College
- The IRS defines dependents as "qualifying children" through four categories: age, support, residence and relationship. A child is dependent until age 19, or if he's a full-time college student, he's a dependent until age 24. He must not have paid the equivalent of half his own support during the tax year. He must have lived with the taxpayer in the same principle residence for at least half the tax year. Finally, a dependent must be related to the taxpayer; acceptable relationships include children (birth, step and foster), siblings and step-siblings, and any descendants from one of these relatives.
- This credit can be claimed by students or their parents as long as the student is receiving her education at a postsecondary school and tuition is being paid. Parents can claim a Lifetime Learning Credit for more than one child at a time but eligibility is calculated by each family instead of per student. The dependent child cannot claim the Lifetime Learning Credit if her parents are claiming it for her in the same tax year.
- The American Opportunity Credit expanded on the old Hope credit beginning in 2009. It can be claimed for the first four years of tuition and fees at a postsecondary institution. The credit pays up to $2,500 a year towards tuition. Unlike the Lifetime Learning Credit, the American Opportunity Credit pays money for books and supplies. Income greater than $80,000 will begin to reduce the amount of the credit, and income of $90,000 or above will make the student and his parents ineligible for this particular credit. Students and parents cannot claim the credit at the same time for the same year.
- In addition to tax credits, the IRS offers some tax deductions for education expenses. A student or his parents can claim up to a $4,000 tax deduction using the Tuition and Fees Deduction. Students, or parents who took out student loans for their dependent children, can also apply for up to $2,500 under the Student Loan Interest Deduction.
- If you need further financial assistance and you've already used the credits and deductions you qualified for, you should look into tuition assistance like private or school-specific scholarships, various federal and private grants, and employer-provided assistance.