List of College Expense Tax Deductions for a Daughter

As a parent, paying for your daughter's college expenses can be a financial burden. Fortunately, you can recoup some of those expenses through deductions and credits when you file your tax return. The deductions you're eligible to claim will depend on whether you're still claiming your daughter as a dependent, and whether your daughter is filing her own tax returns.

Tuition and Fees Tax Deduction

Parents are allowed to deduct up to $4,000 per year on their daughter's qualified educational expenses. To qualify for this credit, you must pay the educational expenses for your daughter, your daughter must be enrolled at an eligible school, and you must claim your daughter as a dependent on your tax return. Qualified expenses include tuition, course-related supplies, student activity fees, registration charges and lab fees. The actual amount you can deduct will depend on your income. Single parents with an income of less than $65,000, or couples with an income of less than $130,000 will qualify for the full amount. The limit for a partial deduction of $2,000 is an income of up to $80,000 for singles, or $160,000 for couples. Anything over these figures makes you ineligible for this credit.

Interest Deduction

If you claim your daughter as a dependent on your taxes, and you're currently paying interest on student loans that you took out for her education, you may be eligible to deduct up to $2,500 as a student loan interest deduction. To qualify, your adjusted gross income must be less than $75,000 if you're filing individually and less than $150,000 if filing jointly. In addition, you'll be able to continue deducting any interest you pay on an annual basis for the duration of the student loan.

Lifetime Learning Credit

The lifetime learning credit can be claimed by parents even if their daughter files her own tax return. However, both the parents and the child cannot claim the credit at the same time. Also, the parents must still claim their daughter as a dependent to qualify. The lifetime learning credit is calculated by taking 20 percent of the parent's out-of-pocket expenses for eligible school expenses, up to a maximum of $10,000. Therefore, the maximum credit that can be claimed per year is $2,000.

American Opportunity Tax Credit

The American Opportunity Tax Credit offers parents a tax credit for their daughter's tuition, books, school fees and other course materials from their taxes. To qualify for this credit, a single parent must earn less than $80,000 per year, and married couples less than $160,000 per year. The credit itself is capped out at $2,500 per year and is calculated by adding 100 percent of the first $2,000 in eligible expenses and 25 percent of the next $2,000 in eligible expenses.

References

• IRS.gov: Six Facts about the American Opportunity Tax Credit
• IRS.gov: Lifetime Learning Credit
• SmartMoney: The College Tax Breaks Explained
• Get Ready for College: Tuition and Fees Deduction
• Universit of California Irvine: Frequently Asked Questions About Eligibility for the Student Loan Interest Deduction
• Internal Revenue Service: Publication 970 Tax Benefits for Education 2010