Even if your college-age child has an income from working, you may be footing the greater part of the bill that pays your child’s living expenses and educational costs. And this amount is multiplied when you have more than one child in college at the same time. Claiming tuition costs and student loan interest deductions for dependents can help reduce your income tax liability so you’ll see more income and fewer taxes.
The money you pay for your child’s tuition and interest on education loans is income tax deductible for you if your child qualifies as your dependent.
Define College Students as Dependents
Children who are self-supporting and who do not meet the IRS definition of a dependent can claim themselves on their tax return and take their own education tax deductions. But if you have any children who do meet the IRS definition as your dependent, they cannot claim themselves; if this is the case, you can claim them and take any allowable education tax deductions. Before you can claim these deductions, your child must be a “qualifying child” who meets these six tests:
- Relationship test. In the eyes of the IRS, a qualifying child can be related to you in many ways, including your daughter, son, stepchild, foster child, sister, brother, half sister, half brother, stepsister, stepbrother or even a dependent of any of these, such as your niece or grandchild.
- Age test. Your child must be a full-time student who is under the age of 24 by the end of the tax year for which you’re claiming the child as a dependent. A qualifying child must also be younger than you (and your spouse, if you're filing jointly).
- Residency test. Your child must live with you for more than half the year, except for temporary absences; for example, when a child is away at school.
- Support test. Your child cannot provide more than half of his own financial support.
- Joint return test. Your child cannot file a joint tax return with a spouse unless the reason is solely to claim a tax refund.
- Exclusive qualifying child test. If more than one person can claim your child, you must meet the IRS "tiebreaker rules" as outlined in IRS Publication 17.
Review the Exceptions
If you qualify for a tuition and fees deduction, you can claim this deduction as an adjustment to your income without itemizing on IRS Form 1040 or 1040-A by completing IRS Form 8917 (Tuition and Fees Deduction) and attaching it to your tax return. Form 8917 lists some exceptions, including considerations of your marital status and income. For example, you cannot claim tuition fees and student loan interest on taxes if your tax filing status is married filing separately or if your modified gross income is more than $80,000 (if filing single) or more than $160,000 (if filing jointly with your spouse).
Claim 2018 College Student Deductions
If you choose to itemize college costs, you can claim a standard deduction allowance, which is the greater of $1,050 or the dependent’s income plus $350. In addition, 2018 is the first year for which you cannot claim exemption allowances for your dependents.
Claim 2017 Deductions and Exemptions
For 2017 income tax returns, which you’ll file in 2018, you typically can claim a $4,050 exemption for each of your dependents in addition to any qualifying deductions for tuition fees and student loan interest on taxes.
- efile.com: How to Claim a Qualifying Child as a Dependent for Tax Deductions
- IRS: Publication 17 - Part B, Rules if You Have a Qualifying Child
- IRS: About Form 8917
- IRS: Topic 456 - Student Loan Interest Deduction
- Forbes: IRS Announces 2018 Tax Rates, Standard Deductions, Exemption Amounts and More
- IRS: Five Things to Remember About Exemptions and Dependents For Tax Year 2017
- tax forms image by Chad McDermott from Fotolia.com