Federal Tax Breaks for College Parents

Once my oldest daughter had decided on a college and I knew writing tuition checks would be in my near future, I decided to research federal tax breaks for college parents.  Finding this information was not as straight forward as I hoped it would be, but after researching in several different places, I was able to put together some general guidelines.

Top Tips For Claiming Your Kid’s College Expenses on Your Taxes

• If your Modified Adjusted Gross Income (MAGI) is over $180,000  you cannot take any tax credits or deductions for your kid’s college expenses (based on the rules at the time I am writing this).  If you think your MAGI (usually the same as your AGI) will be close to the limit, but not far over, consider kicking more pre-tax dollars to a 401K or Flexible Spending Account.
• You cannot claim both a tuition deduction and a credit (either Lifetime Learning Credit or American Opportunity Tax Credit) in the same year.  You need to compare the three and see which, if any, you are eligible for, and which will provide the biggest benefit.
• Money spent on room and board can never be claimed on your taxes.  Only tuition, fees and sometimes supplies (depending on the deduction/credit) are eligible.
• You cannot claim your kid’s college expenses if you use the filing status of Married Filing Separately.
• If you claim an exemption for the student on your taxes, then you can claim the student’s educational expenses.  The student cannot claim these expenses on his/her tax return.
• If you do not claim an exemption for the student on your taxes, then the student can claim his/her educational expenses on his/her tax return.  You cannot claim these expenses on your tax return.
• It does not matter whether the money to pay the expenses came directly from you or came from the student.  If you are claiming the expense, both sources are treated as if you had paid them.
• Your student’s school is required to provide a 1098-T Tuition Statement by January 31.  Use this form when filling out your taxes.
• If you think you are eligible for a credit or deduction, make sure at least $4,000 is paid towards tuition and fees from an account that you or your child own.

Comparison Table of Federal Tax Credits and Deductions for Educational Expenses

Disclaimer:  I am not a tax professional and I am relying on the accuracy of information found on the IRS website and other sites.  If you have further questions on federal tax breaks for college parents, I suggest checking with your tax advisor.  If you do your own taxes, TurboTax makes it easy to enter your educational expenses and will figure out the best credit/deduction for you (if you qualify for one).