If you provide financial support to a college student, whether it's yourself or another family member, you may be eligible for federal tax breaks. These breaks come in the form of tax credits and tax deductions. Some of these tax breaks are alternatives to each other, meaning that you cannot claim all of them at the same time.
The Personal or Dependent Exemption
If you supply at least 50 percent of the financial support for yourself or a qualifying relative, you can claim a personal exemption for yourself or a dependent exemption for a relative. You claim the personal or dependent exemption by listing it on Form 1040. For the 2011 tax year, each exemption represented a deduction from taxable income of $3,700. If your child is over 18, he must be a full-time student and under 24 at the end of the tax year. He must live with you more than 50 percent of the year, except for times when he is away from home for certain reasons--to attend college, for example.
The American Opportunity Credit
You claim the American Opportunity Credit by deducting it from your total tax due on Form 1040. The college should provide you with Form 1098-T, which lists your expenses. Use Form 8863 to figure the amount of your credit. The American Opportunity Credit applies if the student is enrolled at least half-time during his first four years of post-secondary education. You may credit up to $2,500 against your total tax due for each student for whom you paid eligible expenses -- tuition, books and certain fees. You cannot claim the credit if your modified adjusted gross income exceeds $90,000, or $180,000 if married and filing jointly.
The Lifetime Learning Credit
Use Form 1098-T and Form 8863, along with Form 1040, to claim the Lifetime Learning Credit. The Lifetime Learning Credit does not require the student to be enrolled in a degree-seeking program, and unlike the American Opportunity Credit, it can cover expenses for graduate school. The student does not have to be enrolled at least half-time. You may credit up to $2,000 per tax return against your total tax due for expenses that you paid for tuition, books and certain fees. Your modified adjusted gross income must not exceed $$61,000, or $122,000 if you're married and filing jointly. You cannot claim both the Lifetime Learning Credit and the American Opportunity Credit in the same year for the same student.
Tuition and Fees Deduction
You claim this deduction on Form 1040 and Form 8917, even if you don't itemize your deductions, meaning that you can use it together with the standard deduction. The maximum deduction from your taxable income is $4,000 per tax year. You can't claim the Lifetime Learning Credit or the American Opportunity Credit if you claim the tuition and fees deduction, but this deduction is useful if you are ineligible for education tax credits. You cannot claim the deduction if if your modified adjusted gross income exceeds $80,000 -- $160,000 if you file a joint return.
- American Institute of CPAs: Dependency Exemption Issues for College Students
- Internal Revenue Service: Publication 501 -- Exemptions, Standard Deduction, and Filing Information
- Internal Revenue Service: Tax Benefits for Education: Information Center
- Internal Revenue Service: Instructions for Form 8863
- Internal Revenue Service: In 2011, Many Tax Benefits Increase Slightly Due to Inflation Adjustments
David Carnes has been a full-time writer since 1998 and has published two full-length novels. He spends much of his time in various Asian countries and is fluent in Mandarin Chinese. He earned a Juris Doctorate from the University of Kentucky College of Law.