Did you know that if a student is a claimed dependent, only that taxpayer my claim the educational credit for the student’s qualified tuition and related expense. Qualified expenses paid by a dependent student are treated as paid by the person claiming the dependency deduction.
Tax planning consideration – A taxpayer who cannot claim the credit may want to consider not claiming a student as a dependent to allow the student to take the credit. However, in this case, the student’s personal exemption will be lost, since the personal exemption for a person who can be claimed as a dependent on another’s return is zero. Thus, this choice is most likely to be favorable for taxpayers who are subject to the phase-out of the personal exemption.