Divorced Parents and College: Who Claims the Credit?
Divorce is not just a legal matter; it can have a significant impact on many aspects of life, including the financial responsibilities of both parents for their children’s education. One of the most important issues to address is which parent claims the credit for college expenses on their tax return. In this article, we will examine some of the key questions related to the issue and provide answers to help divorced parents to claim the college and navigate this complicated process.
What is the American Opportunity Tax Credit (AOTC)?
The American Opportunity Tax Credit (AOTC) is a federal tax credit that provides financial assistance to eligible college students or their parents. The AOTC is worth up to $2,500 per student per year and can be claimed for up to four years of undergraduate education. The credit is available to parents who are paying college expenses for their dependent children.
What is a Dependent Student?
A dependent student is a student who relies on their parents or legal guardians for financial support. In general, a student is considered a dependent if they are under the age of 24, unmarried, and enrolled full-time in a college or university. A dependent student must also live with their parents for at least six months of the year.
Who Can Claim the AOTC for College Expenses?
If both parents are eligible to claim the AOTC, only one parent can claim it on their tax return. The parent who claims the credit must meet the following criteria:
- The parent must claim the dependent student as a dependent on their tax return.
- The parent must pay for qualified college expenses, such as tuition, fees, and course materials.
- The parent’s modified adjusted gross income (MAGI) must be below the threshold set by the IRS.
How is the AOTC Divided Between Divorced Parents?
If divorced parents cannot agree on who should claim the AOTC, the IRS has established rules to determine which parent is eligible. The parent who has custody of the student for the majority of the year is generally the one who is entitled to claim the credit. If the student spends an equal amount of time with both parents, the parent with the higher adjusted gross income is typically the one who can claim the credit.
What if Both Parents Agree to Split the AOTC?
If both parents agree to split the AOTC, they must do so according to a pre-existing agreement, such as a divorce agreement or a separation agreement. The agreement must be in writing and must clearly state how the AOTC will be divided between the parents.
What if One Parent Pays More for College Expenses?
If one parent pays more for college expenses than the other, they may be entitled to claim a larger portion of the AOTC. However, the IRS does not take into account who paid for what when determining which parent is eligible to claim the credit. The parent who meets the eligibility criteria and has custody of the student for the majority of the year is the one who is entitled to claim the credit.
What if the Dependent Student is Not a U.S. Citizen?
If the dependent student is not a U.S. citizen, they may still be eligible for the AOTC if they meet certain criteria. The student must be a resident alien, and they must have a valid Social Security number. The parent who claims the student as a dependent on their tax return must also have a valid Social Security number.
Conclusion
In conclusion, the issue of who can claim the AOTC for college expenses can be a complex one for divorced parents. It is important to understand the eligibility criteria and to have a written agreement in place if the parents decide to split the credit. Consulting with a tax professional can also be helpful in navigating this issue and ensuring that both parents receive the appropriate tax
