Can a Grandmother Who Is Paying for a Granddaughter's College Get a Tax Credit?
To claim one of the tax credits for educational expenses, you must have paid the expenses for yourself, your spouse or a dependent who you claim on your tax return. Therefore, you must be able to claim your granddaughter as a dependent to be eligible for the tax credit.
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Parents Have Priority
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You can only claim your granddaughter as your dependent if her parents do not claim her on their tax return. Unless they are out of the picture, do not file taxes or earn a very low income, they will probably be the ones claiming your granddaughter. Therefore, you will not be able to get a tax credit for paying her tuition.
If Parents Don't Claim
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If neither of your granddaughter's parents claim her as a dependent on their tax returns, you might be able to claim her as a qualifying child or qualifying relative. To be a qualifying child, she must have been younger than 24 during the tax year, she must have provided less than half of her financial support during the year, and she must have lived with you for more than half of the year. Temporary absences due to her being at school are acceptable. To be a qualifying relative, she must have a gross income of $3,650 or less, and you must have provided at least half of her financial support during the tax year. If she meets the criteria for being a qualifying child or qualifying relative, and nobody else claims her, you can.
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Tax Credits
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If you get to claim your granddaughter on your tax return, you can take one of the two education tax credits. To claim the American Opportunity Credit, she must be a full-time student who has not completed more than four years of undergraduate education. This tax credit is for up to $2,500 and is partially refundable. If you cannot claim the American Opportunity Credit, take the Lifetime Learning Credit instead. The credit is for up to $2,000. Both credits are based on the amount you and your granddaughter paid for tuition and fees during the tax year.
Considerations
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If you paid the tuition directly to the college, and your granddaughter's parent claims her as a dependent, that parent should be able to claim the education tax credit based on the money you paid. If this is the case, you could work out an arrangement for the parent to give you the tax credit money or to contribute it toward your granddaughter's education next year so you don't have to pay as much.
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