Are There Any Tax Deductions for a Son That Does Not Live With Me But I Pay for College?
- The American Opportunity credit replaced the HOPE credit. The American Opportunity credit available until at least 2012 is worth up to $2,500 for the individual paying for college. This is the largest possible education credit, and the IRS will refund up to 40 percent of it if the credit exceeds the taxes you owe. To get largest American Opportunity credit, the student must accrue at least $4,000 in college-related expenses.
The Lifetime Learning Credit provides up to a $2,000 tax credit. You may claim this credit for any number of years while the American Opportunity credit can only apply for the four years or post-secondary education. - In addition to taking a tax credit, you can deduct interest paid on student loans. The maximum deductible was $2,500 in 2010. Your child needs only to have been a dependent when the loan was received, although he may no longer live with you.
- When the parent and student qualify for any education tax deductions, the family should calculate who benefits the most from the deduction. The parent can only claim the student as a dependent as long the parent pays for more than 50 percent of college-related expenses. If the parents can save a lot more, it might be in the best interest of the family to have the parents take the deduction, suggests MSN MoneyCentral.
- Before claiming an education tax credit, you must make sure the student qualifies for it. For the American Opportunity credit, the student must be enrolled at least half time at a nationally recognized institution. If you have a modified adjusted gross income of more than $90,000 or $180,000 if you file jointly, you cannot claim this credit. The Lifetime credit income limits are $60,000 and $120,000. The student may not receive any credits with a felony drug conviction.
