How Does A Child Going To College Affect Tax Filing?

How does a child going to college affect tax filing? One benefit is that parents may be able to continue to claim a child in college as a tax exemption for several more years than if the child were not going to college.

Parents are often worried about how the expenses of sending a child to college. If this is your concern, it might ease your mind to know that Uncle Sam wants people to get an education, and offers tax breaks to parents with children continuing education. Below are some things you need to be aware of this tax season if your child is going to college.


One benefit is that parents may be able to continue to claim a child in college as a tax exemption for several more years than if the child were not going to college. Brian K. Gilroy, CPA and Attorney, explains, "If they're full time students you get to claim them as dependents until their 24 instead of 19." Another benefit, Mr. Gilroy tells us, is that "student loan interest is deductible on the front page of your 1040, on line 33."

You do need to meet the eligibility requirements to deduct student loan interest, however. If you do not meet eligibility, take heart- it simply means you're managing your money well. Says Mr. Gilroy, "If you wisely use your student loan money you probably never get to deduct it because you're making too much money to deduct the student loan. The student loan interest is capped [as of 2006] at $2,500 dollars per year, and there are phase outs for student loan interest- 'phase outs' being that, if you make more money than a specified amount, you're not allowed to deduct your student loan money."

In addition to deductions, there are also credits for children going to college. According to Mr. Gilroy, "A deduction only deducts what you owe in taxes, a credit will give you money back," making them a valuable tax benefit. What kind of credits are there? "There's the Hope Credit and the Lifetime Learning Credit," Mr. Gilroy says.

The Hope Credit, sometimes referred to as the hope scholarship, is dependent on how much you pay for qualified educational expenses. You may get up to $1,500 per eligible student if meeting the requirements as outlined in the Internal Revenue Service publication 970, Tax Benefits For Education, stating that the hope credit is:




- Available only until the first 2 years of post-secondary education are completed
-Available only for 2 years per eligible student
-Student must be pursuing an undergraduate degree or other recognized education credential
- Student must be enrolled at least half time for at least one academic period beginning during the year
-No felony drug conviction on student's record

In contrast, the Lifetime Learning Credit is, according to publication 970:

- Available for all years of post-secondary education and for courses to acquire or improve job skills
- Available for an unlimited number of years

- Student does not need to be pursuing a degree or other recognized education credential
- Available for one or more courses
- Felony drug conviction rule does not apply

Only one of these credits can be claimed per qualifying student in your household, and, like the student loan deductions, are phased out based on your income.

Of course, before you do claim your child as an exemption and try to deduct any student loan money or file for tax credits, make sure that you are entitled to do so. Not all college students can be claimed by their parents, depending on things such as how much money they earn for themselves in the last tax year, and where they lived. While some people believe it to be a choice whether or not to claim their college-age child as a dependent, it simply isn't. "There's a very specific guidelines for whether someone is a dependent or whether they're not a depend. If they're not a dependent, the parents aren't going to be able to claim them as a dependent, in which case, most of the credits won't apply to the parents. If they're in a case when they're going to college and the parents can still claim them, then the parents get to claim them for dependent, get the exemption and [if eligiblity requirements are met] the Hope Credit and the Lifetime Learning Credit." Mr. Gilroy explains.

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