Tax Credits for the Tuition Expenses of Your Kids
College is expensive. Fortunately, the Internal Revenue Service (IRS) offers tax breaks to qualified individuals who pay college expenses. If your child attends college and you pay his tuition, you may be eligible for tax deductions or credits. However, you can't typically claim these tax breaks unless the child qualifies as your dependent.
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Qualifying Dependent
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You can't claim tax credits or deductions for an individual's tuition costs unless he qualifies as your dependent. Your child must be your biological child, adopted child or stepchild. If your child is a part-time student, he must not be over age 19. If he is a full-time student, he must not be over age 24. He must have lived with you for at least half of the year, and he must not have provided more than half of his own support.
American Opportunity Tax Credit
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The American Opportunity Tax Credit allows you to claim an income tax deduction of up to $2,500 for tuition and educational supply costs you paid for a dependent. To claim the credit, you must also claim an exemption for the dependent whose expenses you paid. If you qualify for the credit, you can claim 100 percent of the first $2,000 and 25 percent of the next $2,000 you paid toward qualifying expenses.
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Lifetime Learning Tax Credit
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The Lifetime Learning Tax Credit allows you to deduct up to $2,000 from your owed income tax for qualifying educational expenses that you paid for your dependent child. Qualifying expenses include tuition and other educational fees, such as the cost of books and supplies, that you paid directly to the institution. If you qualify for this credit, you can claim 20 percent of the first $10,000 you paid toward qualifying expenses.
Considerations
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You can't claim both tax credits for the same expenses. If you claim a tax credit, you can subtract the credit directly from your owed income tax. You may also qualify for deductions from your taxable income for tuition and fees, but you can't claim a credit and a deduction for the same student. Though you can't claim tax credits or deductions for tuition if your child isn't your dependent, your child may qualify to claim the credits or deductions on his tax return.
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References
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