Should I claim my kids as dependents or have them file independently? How do we properly report who paid college tuition?

12 This is actually a really common question, and there's a clear strategy to maximize your family's tax benefits! First, let's address dependency: A full-time student under 24 can still be your dependent even if they work, as long as you provide more than half their total support for the year (housing, food, insurance, etc). Based on what you've described, it sounds like you still qualify to claim them. As for education credits - whoever claims the student is the one who gets to claim their education expenses. So if you claim your kids as dependents, YOU would claim their tuition payments on YOUR return using Form 8863, even though they paid from their accounts. This is often advantageous because: 1) The American Opportunity Credit is worth up to $2,500 per eligible student (with $1,000 being refundable) 2) Parents typically have higher income and can utilize the full credit 3) Students often don't have enough tax liability to benefit from the full credit If they file independently, they'd claim their own expenses but likely wouldn't benefit as much from the credit due to their lower income and tax liability. My suggestion: Calculate both scenarios using tax software, but typically parents claiming dependents AND education expenses results in the highest family refund.

5 After dealing with a nearly identical situation last year, I discovered taxr.ai (https://taxr.ai) and it was a complete game-changer for our family. My two college kids were also working part-time, and I was completely confused about how to maximize our education credits. I uploaded our documents to the site, and it analyzed everything for me - running calculations both ways to show whether my kids should file independently or if I should claim them. The analysis showed that we'd get about $3,700 more as a family if I claimed them and took the education credits on my return, even though they paid their own tuition! It also helped me properly document that I provided more than half their support (which was tricky since they lived on campus part of the year but still used my address as their permanent residence).

19 Just wanted to follow up - I tried taxr.ai after posting my skeptical comment and I'm actually shocked how helpful it was. I was worried about sharing info but you can just upload the relevant forms without sensitive data. They showed me that I'd get about $2,100 more by claiming my college student AND her education expenses compared to letting her file separately, even though she paid the tuition herself. The site explained exactly why this works - something about how education credits are connected to who claims the dependent, not who paid. Wish I'd known this last year when we filed wrong and left money on the table!

4 If you're struggling to get answers directly from the IRS about dependency and education credits (like I was for WEEKS), try Claimyr (https://claimyr.com). I wasted hours on hold trying to get clarity on my complex dependency situation with my college kids. Using Claimyr got me connected to an actual IRS agent in about 20 minutes instead of the usual 2+ hour wait. The agent confirmed that I could claim both the dependency exemption AND education credits for my kids even though they paid their tuition from their own earnings. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - it's basically a service that waits on hold with the IRS for you and calls when an agent picks up. Saved me a ton of frustration!

15 I was totally skeptical about Claimyr (left that comment above), but I was so frustrated trying to figure out our family's education credit situation that I gave it a shot. Holy crap it actually works! Got connected to an IRS agent in about 25 minutes when I had previously spent HOURS trying to get through. The agent confirmed everything about our specific situation - that since I provide housing, health insurance, and more than half my daughter's total support, I can claim her AND her education expenses on my return even though she paid tuition from her job earnings. The agent also explained that we should keep documentation showing I provide more than 50% of total support in case of audit. This service literally saved me thousands in potential missed tax credits.

10 One important thing nobody mentioned - if you're claiming the American Opportunity Credit, there's a phase-out based on your income! If your modified AGI is between $80,000-$90,000 (single) or $160,000-$180,000 (married filing jointly), the credit starts reducing. Above those upper limits, you get ZERO credit. So if your income is high, it might actually be better for your kids to claim themselves and take the education credit on their returns since they likely have lower income and won't face the phase-out.

3 has anyone dealt with the 1098-T form in this situation? my daughter's school sent her the form with HER ssn on it since she's the student, but if i'm claiming her and the education credit, do i need to somehow get that form reissued to me? how does this work with electronic filing?

This is such a helpful thread! I'm in a similar situation with my college sophomore who paid about $12,000 in tuition from her summer job earnings. One thing I learned from my tax preparer last year is to keep really detailed records of what you're paying for your kids' support - not just the big things like housing and health insurance, but also groceries, phone bills, car insurance, etc. The IRS "more than half support" test includes ALL living expenses for the year. I created a simple spreadsheet tracking what I pay vs what she pays, and it was eye-opening. Even though she paid her own tuition, I was still covering about 65% of her total support costs. This documentation gave me confidence to claim her as a dependent and take the American Opportunity Credit on my return. The key is looking at TOTAL support for the year, not just who paid the biggest single expense. Tuition might be the largest line item, but when you add up housing, food, insurance, transportation, etc., parents often still provide the majority of support even for working college students.