Who Should Take Education Tax Breaks: Parents or Students?

When it comes to education tax breaks, it’s important to carefully consider your options, and plan out who is going to take what tax break. This is an important distinction because it’s an either/or situation in terms of who gets the tax break. If the parent claims the education tax deduction or credit, then the child (in this case, the dependent) can’t claim it. If the child claims it for himself or herself, then the parent can’t claim it. Parents have to communicate with their kids since the education tax breaks are only allowed to be claimed on either one of your tax returns and not both.

Is the Student a Dependent?

First of all, you need to determine if the student is a dependent. If a parent claims his or her student as a dependent, then that’s who gets to take the tax credit or education deduction. Whether it’s the American Opportunity Tax Credit, Lifetime Learning Credit, or the Tuition and Fees Deduction, only one person gets the tax advantage and it often comes down to whether the student is a dependent in the eyes of the IRS. If a student is a dependent on someone else’s tax return, the student doesn’t qualify for these tax breaks.

If a student isn’t claimed as a dependent, though, it’s possible for him or her to claim an education tax credit, or take the deduction.  One thing to keep in mind, each student cannot claim more than one tax break. So it’s one of the education credits or education deduction (not all of them).

Should the Student Take the Tax Credit or Deduction?

In some cases, it makes sense for the student to take the tax break. If the student is married, and no longer dependent on a parent for support, obviously that’s who should take the education tax break. Additionally, if the student makes enough money to owe taxes, it makes sense to reduce that tax bill as much as possible.

Most of the time, though, students don’t earn enough money to owe taxes. As a result, in many cases, it makes more sense for parents to claim their children as dependents and reap the benefits of the tax breaks. After all, parents have spent quite a lot to raise their children, and probably help pay for college. It’s only reasonable that they receive some sort of financial benefit in return – and a lower tax bill is one way to recoup a few of those costs.

Once you have made your decision about who will claim the education tax benefit, TurboTax will figure out which education tax credit or deduction you are eligible for based on your entries when you prepare your taxes.

If you have questions, you can connect live via one way video to a TurboTax Live CPA or Enrolled Agent to get your tax questions answered.  A TurboTax Live CPA or Enrolled Agent can also review, sign, and file your tax return.