Writing off tuition?

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solotee
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Joined: Thu Apr 09, 2009 5:20 pm

Writing off tuition?

Postby solotee » Thu Jan 07, 2010 1:59 pm

I had a scholarship to cover my four years in undergrad and have no clue how tuition is related to taxes. I'm trying to persuade my parents to let me borrow $15,000/year for school. Whether or not I'm successful will largely depend on how much they can write off on their taxes.

Is there a limit to how much tuition they can write-off annually?
Also, will I still be considered a dependent if I move out and stay unemployed? Or is that when I become considered independent?

Any help would be greatly appreciated!

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NancyBotwin
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Re: Writing off tuition?

Postby NancyBotwin » Thu Jan 07, 2010 2:17 pm

There is a limit - not so much that they can't claim to have paid a certain amount, but that they can only deduct a certain amount. See http://www.irs.gov/publications/p970/ch06.html#en_US_publink100020972. There are also other credits that you can look into. The problem here is that they have to claim you as a dependent on their taxes in order to tax these deductions. If they don't do that, then they cannot take any of the deductions or credits.

sarahd
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Joined: Sun Mar 01, 2009 7:37 pm

Re: Writing off tuition?

Postby sarahd » Thu Jan 07, 2010 2:26 pm

solotee wrote:I had a scholarship to cover my four years in undergrad and have no clue how tuition is related to taxes. I'm trying to persuade my parents to let me borrow $15,000/year for school. Whether or not I'm successful will largely depend on how much they can write off on their taxes.

Is there a limit to how much tuition they can write-off annually?
Also, will I still be considered a dependent if I move out and stay unemployed? Or is that when I become considered independent?

Any help would be greatly appreciated!


You are considered financially independent as a grad school student for the purposes of financial aid.

Your parents can continue to claim you on their taxes as a dependent until you reach age 24 if they provide your support AND you are a full time student.

From the IRS website: http://www.irs.gov/newsroom/article/0,, ... 98,00.html
In general, to be a taxpayer’s qualifying child, a person must satisfy four tests:

Relationship — the taxpayer’s child or stepchild (whether by blood or adoption), foster child, sibling or stepsibling, or a descendant of one of these.
Residence — has the same principal residence as the taxpayer for more than half the tax year. Exceptions apply, in certain cases, for children of divorced or separated parents, kidnapped children, temporary absences, and for children who were born or died during the year.
Age — must be under the age of 19 at the end of the tax year, or under the age of 24 if a full-time student for at least five months of the year, or be permanently and totally disabled at any time during the year.
Support — did not provide more than one-half of his/her own support for the year.


In terms of moving out, if you move to what will be your temporary school apartment and still have your parent's address as your permanent address, you will still be under dependent. If you are moving out permanently, then you are independent.

Tuition costs are deductible on taxes. The amount of the deduction varies depending on their income and your status as a student. It can reduce the amount of your taxable income up by up to $4000.

For example, if your parents' income is 100,000 regardless of how your tuition is paid (either in cash or via loans) and regardless of how much your tuition is, their taxable income is reduced to $96,000. Not a huge benefit. This is a benefit for them as a result of you being their dependent. They need to speak with a tax professional about the best way to handle the costs for law school within the realm of their income. I know my husband and I make too much to qualify for any of the education deductions, so it does matter.

There are also credits available, but those are typically for midwest disaster areas or undergrad costs as well as disappearing at even lower income levels.

Personally, I would really look into the benefits to you financially to becoming independent versus the benefits to your parents.
Last edited by sarahd on Thu Jan 07, 2010 2:28 pm, edited 1 time in total.

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solotee
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Joined: Thu Apr 09, 2009 5:20 pm

Re: Writing off tuition?

Postby solotee » Thu Jan 07, 2010 2:26 pm

Thank you for the clear answer and helpful source.

UCInfo
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Joined: Thu May 07, 2009 9:01 pm

Re: Writing off tuition?

Postby UCInfo » Thu Jan 07, 2010 5:09 pm

If your income qualifies, you or your parents could claim the Lifetime Learning Credit for up to $2,000 instead of the tuition and fees deduction (you can only claim one or the other). The credit may be worth more than the tuition and fees deduction, depending on your situation.

http://www.irs.gov/publications/p970/ch ... k100020861




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