Education credits and student loan

[RightOn]

Can the parents claim education credits on tuition paid from the proceeds of a student loan borrowed by their dependent child?

[David1980]

Dependent takes out a loan to pay for it, that would be treated as expenses that the dependent is paying. If parents qualify to claim dependent the parents can use those expenses in claiming an education credit.

https://www.irs.gov/publications/p970/ch02.html#en_US_2016_publink1000204381

The one thing to watch out for is that the loan is support provided by the dependent. If the dependent provides over half their own support they may not actually be a dependent at all.

[RightOn]

Dependent takes out a loan to pay for it, that would be treated as expenses that the dependent is paying. If parents qualify to claim dependent the parents can use those expenses in claiming an education credit.

https://www.irs.gov/publications/p970/ch02.html#en_US_2016_publink1000204381

The one thing to watch out for is that the loan is support provided by the dependent. If the dependent provides over half their own support they may not actually be a dependent at all.

Thank you for the reminder.

Scholarships. A scholarship received by a child who is a student isn't taken into account in determining whether the child provided more than half of his or her own support.

Scholarship in the above statement refers to any kind of student financial aid provided to the student from the school. Is my understanding correct?

[David1980]

Thank you for the reminder.

Scholarships. A scholarship received by a child who is a student isn't taken into account in determining whether the child provided more than half of his or her own support.

Scholarship in the above statement refers to any kind of student financial aid provided to the student from the school. Is my understanding correct?

"Financial aid" is a vague concept and could include work study as well as loans. Financial aid may include scholarships, but not all financial aid is scholarships. I think there's a reason publication 17 used "scholarships" and not "financial aid" in that sentence.

[ttbtaxes]

Another issue is how to treat distributions from a 529 plan where the parents are the owner of the plan but the distributions were made for tuition/education related expenses of the child. Who does that count for support?

In the August 2010 edition of the Tax Adviser, there was an excellent article about this and the issue had not be tested and was not settled at the time of the article.

These distributions can be large and tip the scales one way or the other.

[taxmom34]

op asked about student loans. loans are same as cash when determining amount paid to school for the education credit.