Who can claim 1098-T when child graduated in May

Forum|Forum|4 years ago
February 27, 2022
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My child graduated in May 2021 and I can no longer claim her as a dependent since she has not lived at home and has been fully supporting herself since her May graduation. She received a 1098-T from the university for her 2021 Spring semester. Since she was listed as a dependent on our taxes her first 3 1/2 years of college we included her 1098-T on our return. Just questioning who should include this last 1098-T on their return? Parents? Daughter? or no one?

ColeenD3

No, now that she is no longer your dependent, you can no longer claim the credit. She can claim the credit.

Qualifications for claiming the American Opportunity Tax Credit are:

You paid an eligible student's qualified education expenses for higher education at any college, university, or vocational school with a student aid program administered by the US Department of Education
The eligible student is you, your spouse, or a dependent on your return
For the full credit, your MAGI (modified adjusted gross income) is less than $90,000 ($180,000 if you're filing jointly)
- For a reduced credit, your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you're filing jointly)

Hal_Al

Employee

Q. Who should include this last 1098-T on their return? Parents? Daughter? or no one?

A. Simple answer: Daughter. As ColleenD3 said you may only claim the education credit, if the student is your dependent. She can now claim the credit, even if you were the one who paid the tuition.

But taxes aren't simple. Are you sure she can no longer be your dependent?

Graduation year

If he/she was a full time student (under 24) for at least 5 months and lived with you for more than half the year, and did not provide more than 1/2 his own support for the whole year, you can still claim him. Be sure he knows you're claiming him, so he doesn't claim himself. He can only be claimed once. But, he can "file taxes" without claiming his own exemption.

The real question is who should be claiming him in this "transition" year to adulthood. You two have to agree on who is going to claim his exemption. Each should do their taxes both ways and see which way the family comes out best. Even then, you have to meet the rules. The rule is that a child of a taxpayer can still be a “Qualifying Child” dependent, regardless of his income, if:

he is a full time student under 24 for at least 5 calendar months of the year (graduating in May usually means you meet the 5 month rule)
he did not provide more than 1/2 his own support (scholarships are considered 3rd party support and not support provided by the student).
lived with the parent (including time away at school) for more than half the year

So, it usually hinges on "Did he provide more than 1/2 his own support in 2021.

The support value of the home you provided is the fair market rental value of the home plus utilities & other expenses divided by the number of occupants. IRS Publication 501 on page 20 has a worksheet that can be used to help with the support calculation. See: http://www.irs.gov/pub/irs-pdf/p501.pdf (page 15)

If he has already filed one way, he can file an amended return, going the other way.