<p>If you haven’t done your taxes yet, and if you do them yourself, I just thought I’d share something. If your college kid has income of his own, you may find it beneficial to notcount him as a dependant, so he can take a tuition credit. For us, the value to him of the credit was significantly more than what we lost from losing the exemption. In any case, it’s worth running the numbers different ways to see how it turns out.</p>
<p>^^agree…</p>
<p>Accountant gave us the same advice.</p>
<p>If your college kid was under age 24 at the end of 2011, s/he can not claim he refundable part of the Amer. Opportunity Credit, only the non-refundable part. See Pub. 970 for details.
See Pub. 501 for details as to what counts as “support”.</p>
<p>We did that - ie, younger son is not claimed as a dependent on our return, and we let him claim the tax credit, but I felt a little funny about doing that because we paid his tuition, although most of it was out of his 529 plan.</p>
<p>I will tell you what really annoyed me this year. We pay tuition and a few other things, then we scrupulously withdraw 529 money to cover our expenses. Now I do the taxes and I find that he is eligible for a tax credit, but we can’t use the 529 sourced funds to qualify for the tax credit. But then we count some of the 529 funds as TAXABLE (tell me again, why do we have a 529 plan??) then we can claim the tax credit (Insert scream here)</p>
<p>Please give me some ball park figure how this works. My kid made some money over the summer, but it is not enough for him to pay any tax. I don’t see how he can get tax credit when he pays no tax.</p>
<p>As I understand it, it doesn’t matter who pays the tuition, the student can still take the credit (as long as nobody else is taking a deduction or a credit for it). But it won’t help you if the student doesn’t have any tax to offset.</p>
<p>The rules make it difficult for a student aged less than 24 to qualify fir the refundable part of the credit as it requires they provide >50% of their own support from earned income.</p>
<p>I did not do it that way for my daughter last year as I did not see how she would meet that requirement. And she had some earned income, but it was nowhere near enough to say she provided 50% of her own support. Having said that, I heard of someone else who did have their child file as independent and claim the refundable credit even though they had no earned income at all. it was one of the “big box” tax companies that told them to try it even though they probably weren’t really eligible.</p>
<p>My son (22 yrs old) filed his own taxes with the personal exemption this year and did qualify for the full tax credit. He graduated in May and his income for the last 7 months was high enough to constitute >50% of his support for year, coupled with just the right amount of college grants for his last college semester. Of course, he’s “gifting” it back to us because we paid the balance of his tuition for the four years. At least that’s what he agreed to…haven’t seen the cash yet.</p>
<p>I’d like feedback to see if this makes sense: in 2011, D was home about 5 weeks total. She had a work-study job at her out of state private college the fall term; last spring she worked at a store in the town where her college is. She also worked for 2 weeks when she was briefly home between her internship in a third state this summer and returning this fall.</p>
<p>Because of our EFC, D receives grants from her school which cover most of her cost of attendance. Her living expenses for her unpaid summer internship were funded by a stipend her school provided.</p>
<p>I don’t think I should claim her as a dependent- does this make sense?</p>
<p>The “refundable” thing just means that you get paid the credit even if it’s more than your tax liability. Even if the kid doesn’t provide half of his support, he can get the credit up to the level of his taxes, if he has tax liability. Our son had enough earned and unearned income to owe taxes, so he was able to take the credit even though we provide more than half his income.</p>
<p>just be wary about the impact of finaid, however. (Dunno it if not claiming the student would affect efc.)</p>
<p>There is no one simple cut-off figure that can be used. You really do need to do the math every way: Parents taking credits, parents taking deductions, kids taking credits, and (if possible) kids taking deductions. Don’t forget that any given choice may affect your FAFSA/CSS Profile results and your state/city taxes as well.</p>
<p>Our best (tax-wise) option gave us an increase in our FAFSA EFC. But Happykid’s university doesn’t meet need anyway so that extra $ in the EFC doesn’t change anything for us. For SOME families, however, this could mean qualifying for Pell or not.</p>