Education expenses

[mrbill]

Client attends college and has tuition expenses. Parents are divorced, and claim client on alternate years. For 2014, client lived with custodial Mother. Non-custodial Father claimed her as a dependent for 2014, but did not take education expenses as a deduction. Mother cannot take education deduction, Father did not take the education deduction. Can daughter claim the deduction, even though she cannot claim herself as a dependent. I am reading different opinions. Thanks,

[kathyc2]

Client attends college and has tuition expenses. Parents are divorced, and claim client on alternate years. For 2014, client lived with custodial Mother. Non-custodial Father claimed her as a dependent for 2014, but did not take education expenses as a deduction. Mother cannot take education deduction, Father did not take the education deduction. Can daughter claim the deduction, even though she cannot claim herself as a dependent. I am reading different opinions. Thanks,

No, if father claimed dependency exemption. See TTB chart on 12-3.

[Roland Slugg]

Can daughter claim the deduction, even though she cannot claim herself as a dependent? I am reading different opinions.

It's hard to understand how there can be different "opinions" about something like this. The issue is extremely clear-cut, and it's very easy to get an authoritative answer. You can look in TTB as kathyc2 suggests (and which you must have since you can access this site), you can read the instructions for IRS F-8863, which are readily accessible on the IRS's web site, or if you have access to the Internal Revenue Code, you can read §25A of the Code.

The instructions for F-8863 say this:

If a student is claimed as a dependent on another person's tax return, all qualified education expenses of the student are treated as having been paid by that person. Therefore, only that person can claim an education credit for the student. If a student is not claimed as a dependent on another person's tax return, only the student can claim a credit.

In your post you referred to a "deduction." In most cases the credit is more valuable/beneficial than the deduction. Try it both ways and see.

If the father has already filed his tax return for the year in question, he can file an amended return to add the education credit or deduction if it yields a tax benefit for him.

Finally, you said the parents alternate claiming the daughter as a dependent, and you also wrote that the "mother cannot take [the] education deduction," but you didn't say why. Is it because her income is low, and she doesn't pay much tax, or any tax? The AOC is 40% refundable, which means the mother could get a refund for a portion of the credit, even if she has little or no tax liability. An even better tax planning idea, however, might be for the parents to agree to let the father claim the daughter every year, for the few years of eligibility remaining ... up to age 24 ... then write a check to the mother every other year to reimburse her for the value, if any, of the foregone exemption. If the father pays taxes, and the mother doesn't, or doesn't pay enough to benefit from the entire AOC, this will result in a net tax savings.

[New York Enrolled Agent]

A follow-up to Roland's post. An authoritative cite that gives one and only one opinion.

Reg. §1.25A-1

(f) Claiming the credit in the case of a dependent.


(1) In general.
If a student is a claimed dependent of another taxpayer, only that taxpayer may claim the education tax credit for the student's qualified tuition and related expenses. However, if another taxpayer is eligible to, but does not, claim the student as a dependent, only the student may claim the education tax credit for the student's qualified tuition and related expenses.