Tax Rules When You Have a Child in College

Tax breaks can help pay the cost of a child's college expenses.

tax time image by Tom Oliveira from

It costs money to have a child in college, and it makes sense to take advantage of any tax deductions or credits that help offset the education expenses you pay. Education tax credits help low- and middle-income families pay higher education costs, while certain above-the-line deductions offset costs for those who earn somewhat higher incomes. Regardless of which educational tax breaks best fit your circumstances, the government sets income limits for phasing them out.

Education Tax Credits

You can claim only one education credit for a student each tax year. Along with other eligibility requirements, you must pay the qualified education expenses for a child you claim as a dependent on your tax return. The American Opportunity credit offers a maximum annual credit of $2,500 for each student. You can only claim the American Opportunity credit for a student for four years. The Lifetime Learning credit has no limit on the number of years you can claim the credit. You can claim up to $2,000 for each year you take the Lifetime Learning credit. Use Form 8863 to claim either of these credits.


If you claim a child who is a college student as a dependent on your federal income tax return, he cannot claim an exemption for himself if he files his own tax return as a single taxpayer. He must indicate that someone else can claim him as a dependent. In order for you to claim your child as a dependent he must be younger than age 24 and a full-time student enrolled in classes at least five months out of the year. He also must live in the same household as you for more than half the year, although living away at college is considered the same as residing with you. In addition, you must provide more than half of your child’s total support during the year.

Claiming the Tuition and Fees Deduction

Even if you don’t itemize deductions on Schedule A, you can take the tuition and fees deduction to decrease the amount of taxable income you owe. However, you may not take the tuition and fees deduction if you claim one of the education credits. To qualify for the deduction, you must pay the tuition and fees for an eligible student who is your dependent and whom you claim as an exemption on your income tax return. The maximum amount you can deduct for the tax year 2011 is $4,000. You may not be able to take the full deduction if your modified adjusted gross income is too high. Attach Form 8917 to your tax return to claim the deduction.

Deducting the Interest on Student Loans

The student loan interest deduction is another adjustment to income that you can claim without itemizing deductions. You must claim the child who is a student as a dependent on your tax return. In addition, the loan must be in your name and not your child's for you to take the deduction. Deduct the lesser of $2,500 or the actual amount of interest you paid for the tax year. If your modified adjusted gross income is too high, you will not be able to take advantage of this particular tax break. On a 2011 tax return, the range when the deduction is phased out is modified adjusted gross income between $120,000 and $150,000 for married taxpayers filing a joint return.