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February 18, 2020
Question

Can I deduct the tuition expense I contributed to my daughter's undergrad degree?

  • February 18, 2020
  • 1 reply
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Hal_Al
Employee
February 18, 2020

Yes, but only if she is your dependent. You not only claim what you paid, you claim what she paid, even if with loans, and/or what any other relatives paid.  You enter her IRS form 1098-T, from the college on your return.

Although there is a tuition "deduction"  available, you will actually claim a more generous tuition tax credit.

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If her tuition was paid by scholarships, there is even a tax “loophole” available. The student reports all his scholarship, up to the amount needed to claim the American opportunity credit, as income on his return. That way, the parents  (or himself, if he is not a dependent) can claim the tuition credit on their return. They can do this because that much tuition was no longer paid by "tax free" scholarship.  You cannot do this if the school’s billing statement specifically shows the scholarships being applied to tuition or if the conditions of the grant are that it be used to pay for qualified expenses.

Using an example: Student has $10,000 in box 5 of the 1098-T and $8000 in box 1. At first glance he/she has $2000 of taxable income and nobody can claim the American opportunity credit. But if she reports $6000 as income on her return, the parents can claim $4000 of qualified expenses on their return.