Tax Tips for Families with a Child in College

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Tax Tips for Families with a Child in College

August 5, 2019

Tax Tips for Families with a Child in College

While having a child in college can certainly cause some additional stress and complications, it can also cause some additional headaches during tax season if you aren’t prepared. Here are some tips and things to keep in mind when you, and possibly your child, are filing at tax time.

Take a Closer Look When Deciding if You Should Claim Your Child as a Dependent

Your child is becoming a young adult; however, you can actually claim your child until they are 24 if they are in school. Although it may not seem as beneficial to claim your child since the Tax Cuts and Jobs Act got rid of the personal exemptions, you can still receive some hefty education tax credits.

Take Advantage of those Education Tax Credits and Deductions

The education credits are the American Opportunity Credit and the Lifetime Learning Credit. You can claim the American Opportunity Credit up to four times for one student. The credit is for up to $2,500 of tuition, fees, and education materials, and it is refundable up to $1,000.

The Lifetime Learning Credit can only be claimed once, but you can’t claim this credit and the American Opportunity Credit. Your child must also be filing single or married filing separately. The credit allows your child to claim up $2,000 on qualified education expenses. This credit is good to take advantage of when your child is on his or her own and attending graduate school.

You can also deduct qualified education expenses up to $4,000 to lower your taxable income. The IRS doesn’t allow you to double-dip, though, meaning you can’t deduct qualified education expenses and claim and education tax credit. Typically, one option is more beneficial than the other depending on your tax situation, so you’ll want to make sure use what is more advantageous.

Tax Tips for Families with a Child in College

Keep in mind that these education credits and deductions may also be the deciding factor on whether or not to claim your child as a dependent. Depending on you and your child’s tax situation, it may be more beneficial you to not claim your child so your child can receive more tax breaks.

When Your Child Needs to File

The requirements for your child filing are different depending on if you claim them as a dependent or not. Your child will likely want to file if they had any significant withholding from their job(s) so that they can get a refund.

If you claim your child, they will be required to file if they have earned income over $6,350 or unearned income (investments) over $1,050. Your child must file if he or she has earned income more than $12,000 and you don’t claim dependency. These numbers are subject to inflation for the 2019 tax year.

Tax Forms You Will Need

Regardless of whether or not you are claiming your child as a dependent, you will need likely need these forms when you have a college student:

  • 1098-T from your child’s college: You will use this to claim education credits or deductions. You can still claim the credits even if the form is in your child’s name if you pay the expenses
  • Form 8863: You will fill out this form when filing to see if you qualify for the American Opportunity Credit or Lifetime Learning Credit
  • Form 1098-E: You will need this form to deduct any qualified student loan interest. You can deduct up to $2,500 against your taxable income.

Filing Multi-State Returns

Your child may be attending college in another state to get as far away as possible. If that’s the case, your child may have been employed in multiple states and needs to file more than one state tax return.

Our tax professionals at Martin Hood LLC are very experienced at working through these situations. Please feel free to reach out to us if you have any questions.

Sources and more information can be found here:

Tax Tips for Families with a Child in College

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