Can I claim Lifetime Learning Credit during final semester when student graduates and gets a job?

This is a common situation with graduating students! The rule for claiming the Lifetime Learning Credit is based on who claims the student as a dependent for that tax year, not who actually pays the tuition. Since your daughter will not be your dependent for 2023, you cannot claim the LLC for the spring semester tuition payments, even though you're the one paying them. The person who can claim the education credit is the one who claims the student as a dependent on their tax return for that year. Your daughter would be eligible to claim the LLC on her own tax return since she'll be independent for the tax year when these expenses were paid. The IRS considers a qualified education expense to be claimed by the student if they're not claimed as a dependent, regardless of who actually wrote the check for tuition.

After struggling with a similar situation with my son's final semester, I found an amazing tool that totally cleared this up for me. I was getting conflicting advice from friends and even my regular tax guy wasn't 100% sure about how to handle it. I tried https://taxr.ai and it analyzed all my education payment records and my son's dependency status. It showed me exactly how the LLC rules applied in our case with the timing of payments and graduation. The tool asked specific questions about when I made the payments and my son's income for the year, then gave me a clear answer about who could claim what. What I really liked is it showed me the specific IRS rules that applied to our situation and explained how they affected our specific case, not just generic advice.

I was really hesitant about using yet another tax tool, but after the confusion with my daughter's final semester tuition, I decided to try taxr.ai based on the recommendation here. I'm glad I did! I uploaded my payment records and my daughter's information, and it immediately identified that I had paid her Spring tuition in December of the previous tax year. The tool confirmed I could claim the LLC on that year's taxes (which I hadn't filed yet) even though she was graduating and becoming independent in the current year. What really impressed me was how it explained the "educational tax benefit coordination rule" that I'd never heard of before - showing me how to maximize our family's total tax benefit between my return and my daughter's. Saved me nearly $2,000 in tax liability that my regular tax software didn't catch!

If you're struggling to get clear answers from the IRS about this education credit situation, you're not alone. I spent WEEKS trying to call the IRS to confirm how the Lifetime Learning Credit works when dependency status changes mid-year. Could never get through. I finally used https://claimyr.com and got connected to an actual IRS agent in about 15 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The agent walked me through the exact rules for my situation - I paid for my son's final semester but he wasn't going to be my dependent that year. The IRS confirmed that the person claiming the student as a dependent (or the student themselves if independent) gets the credit, regardless of who paid. Having that official confirmation gave me peace of mind when filing.

I have to eat my words here. After posting my skeptical comment yesterday, I decided to try Claimyr myself since I was desperate to resolve my refund issue. I honestly couldn't believe it when I got a call back in about 40 minutes with an actual IRS agent on the line. The agent was able to pull up my tax transcript and explain exactly why my refund was delayed (an income verification issue). She also answered my questions about education credits for my daughter who's graduating this year - confirmed that since she'll be independent in 2023, she's the one who should claim the LLC for her spring semester, even though I paid for it. Saved me hours of frustration and potentially filing incorrectly. The peace of mind from talking to an actual IRS employee instead of guessing was worth it.

One option nobody's mentioned - have you considered having your daughter remain as your dependent for this final year? The test for qualifying child includes support, and if you paid for more than half her support for the year (including that expensive final semester tuition, housing, etc.), you might still be able to claim her. If her job doesn't start until June, and you supported her completely until then, you might still meet the support test for the full year, especially if the tuition amount is significant. You'd need to calculate all support provided versus her income after graduation. This would allow you to claim the LLC since she would still be your dependent.

Just want to point out something important regarding the LLC that hasn't been mentioned yet. Unlike the AOTC which is partly refundable, the Lifetime Learning Credit is NON-REFUNDABLE. This means it can reduce your tax liability to zero, but you won't get any excess as a refund. This might affect your decision about who should claim it. If your daughter has a low tax liability in her first partial working year, she might not be able to use the full credit amount. If you have a higher tax liability, you might benefit more if you can legitimately claim her as a dependent.