What kind of tax break do parents get for paying their child's college tuition?
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Answer:
Everyone above is correct but here is some more info. The Hope credit is good for the first two years of school and is worth $1500 in tax credits...a direct reduction of your tax liability. If income is too high and the credit phases out you can take a limited deduction on page one of the form 1040 for tuition paid. After two year the lifetime learning credit is available at 20% of the first $10,000 in tuition or $2,000 per year maximum.
Here is the best part. The source of the money or which accounts you put it in are not important. Even if the student borrows the money and must pay the student loans back after graduation, the credit goes to the taxpayer who claims the student as a dependent. Even if the student has saved the money from years of mowing lawns, the credit goes to the taxpayer who claims the student as a dependent..that is usually mom and dad.
I'm not sure how funds work, but I believe your parents can still claim you on their taxes until you're 23 if you're a full-time (maybe part time too, I'm not sure) college student. This is so because usually parents are only allowed to claim their children on taxes until he/she is 18.
http://www.irs.gov/newsroom/article/0,,i...
Hope Credit and Lifetime Learning Credit are two popular education credits.
Usually the tax refund is credited to the parents tax return or the students if they are independent.
Joe and nikki are right, but beware of the income limits.
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