Important Tax Considerations for College Students and Parents

College students need to be careful that they understand whether or not their parents are claiming them as a dependent and parents should look into what college and education tax credits are available, and while tax pros say it’s great for college students to start filing their own forms, parents and students should double check everything carefully before anyone pushes the “submit” button.

“College students need to be very careful that they understand whether or not their parents are eligible to claim them as a dependent,” says Tom O’Saben, director of tax content and government relations at the American Association of Tax Professionals. Merely not claiming a dependent does not make that taxpayer independent, he says.There are two kinds of education tax credits. The American opportunity credit is for up to $2,500 a year for the first four years toward an undergraduate degree.

The second, a lifetime learning credit, can be used toward an undergraduate, graduate or professional degree and is for up to $2,000 A parent cannot claim both for the same dependent child on a return for the same year, but if there are multiple dependents on the return they could be using either of the credits for each student.

In some cases, claiming your child as a dependent might not be the best move once the entire financial picture is taken into account. “Just providing an address in the state your child’s college is in may not be enough to claim in-state tuition,” O’Saben says.Sometimes college students are still required to file their own return even if their parents claim them. Students and parents should check the rules for dependent filing and determine if the student is required to file their own return based on their gross income, says Kathy Pickering, chief tax officer at H&R Block.

Source: Education Headlines (educationheadlines.net)

College Students Parents Tax Credits Dependent Filing Taxes

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