When you and your spouse share responsibility for supporting a child but file separate tax returns, it's not always clear how the various deductions and credits should be divided at tax time. This can be especially true when the child begins college and the tuition bills begin to mount. Who gets the tuition and fees deduction? The parent claiming the child exemption or the parent paying the bills? Actually, neither, for two reasons. First, you have to pay the bills and claim the exemption to take the tuition deduction. Second, you cannot claim the tuition deduction if you are married filing separately.
One obvious solution to this dilemma is to file a joint return with your spouse. If this is not an alternative, you may want to consider letting the child claim his own exemption and pay his own tuition. There's no rule against you giving him the tuition money, although to claim his own exemption he will have to provide most of his own support. In fact, by claiming his own exemption the child probably will qualify for more grants and student loans, and may actually be able provide more for himself.
If you and your spouse don't live together, one of you may be able to claim the tuition deduction by claiming head of household filing status. You qualify for this filing status if you pay most of your household bills and lived apart from your spouse for the last six months of the year, and your child lived with you most of the year. (If he is away for college he is still considered to be living with you.) As long as you claim the exemption for the child and pay the tuition bills out of your own bank acocunt, you can claim the tuition deduction.
If you and your spouse are divorced, the problem is much simpler. As long as the parent claiming the exemption writes the check for tuition from his or her bank account, that parent gets the tuition and fees deduction. If for any reason the parents can't work out this arrangement, there is another option. The parent claiming the exemption can instead take advantage of either the American Opportunity credit or the lifetime learning credit. These programs provide tax credits of up to $2,500 and $2,000, respectively, based on the amount of tuition costs paid by anybody on behalf of the student. So if your ex-spouse pays the tuition, and you have the exemption, you get to claim the education credits.
Everything else taken into consideration, the best approach depends on your individual personal and financial circumstances. How would losing the child's exemption affect your taxes? Would filing a joint return with the tuition deduction result in lower taxes? Do you want to share a tax return with your spouse? Would the child be better off claiming his own exemption? You may want to run various scenarios through your tax software to see how each choice meets the needs of everyone involved.
Alan Sembera began writing for local newspapers in Texas and Louisiana. His professional career includes stints as a computer tech, information editor and income tax preparer. Sembera now writes full time about business and technology. He holds a Bachelor of Arts in journalism from Texas A&M University.