Personal Finance: Ask the Experts

Get advice on money matters from The Bee's Claudia Buck and a panel of local experts

May 13, 2013
Can my son claim education tax credits if I claim his dependency exemption?

Q: I made $80,000 and TurboTax said I was disqualified from deducting the interest I paid to federal government on the parent loan and/or the tuition I paid. Out of pocket, both totaled over $20,000. I know I would only have received the tax education credit on the out of pocket tuition I paid but since I can't take it, can my son?
Although he was a full-time student, he made about $20,000 working part time at a restaurant and singing at a church. My status is a qualified widow..because my husband died in 2011 I was able to file joint and married.. so the threshold was 160,000 ..he had been disabled and had no income it was same source of guns..seems to penalize non married people whose income is same as two married people. Anyway if I claim my son, can he take the deductions I was not able to? I assume TurboTax was correct in saying I wasn't eligible.

Teresa
Sacramento, CA

A: If you claim your son's dependency exemption, he cannot claim an education tax credit for tuition that you paid on his behalf. The rules do allow your son to claim the American Opportunity tax credit if you do not claim the deduction for his dependency exemption. But your taxes would be higher.

Since your spouse died in 2011, you may qualify to use the Married-Filing-Joint tax rates for 2012 and 2013 if you meet the following requirements:
- You are unmarried as of the end of the year;
- You maintain (pay over 50% of the costs of) a household that is your home and the "principal place of abode" of your son who is your dependent;
- You could file a joint return with your deceased spouse for the year of death.

Your home may still be your son's "principal place of abode" even if he is away at school as long as he has not established another permanent residence and he returns to your home when not away at school. If you do not claim his dependency exemption, you may not be able to qualify as a surviving spouse.

So you will have to look at which of your two options results in the lower overall tax for you and your son: claiming his dependency exemption and using the joint tax rates and losing the education tax credits, or forgoing his exemption and using the single tax rates, which would allow him to claim the applicable education tax credit.

Usually the benefit of the dependency exemption and the joint rates afforded surviving spouses outweigh the potential tax savings your son might receive from the education tax credit.

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Meet Our Financial Experts

Claudia Buck

Claudia Buck is The Sacramento Bee's personal finance columnist. Read all her columns here. Contact her at cbuck@sacbee.com

Terri Carpenter

Terri Carpenter offers advice on job hunting, retraining and career counseling. Carpenter works at Sacramento Works Inc., the career and job training arm of the Sacramento Employment and Training Agency (SETA). With 15 years in the field, she has hands-on experience with everyone from first-time job seekers to career professionals seeking advice after a layoff or looking for a mid-career change. Ask her a question.

Carlena Tapella

Carlena Tapella is a partner in the law firm of Webb & Tapella Law Corp. in Sacramento. The firm specializes in estate planning and probate, such as estates, trusts, conservatorships and litigation. She is a past president of the Sacramento County Bar Association's Estate Planning & Probate Section. Ask her a question.

Kimberly Foss

Kimberly Foss, certified financial planner, is the founder of Empyrion Wealth Management in Roseville. With nearly 30 years in the financial industry, her clients include women in transition, small business owners, retirees and "pre-retirees." Ask her a question.

Jesse Weller

Gregory Burke, a CPA and tax expert with John Waddell & Co. in Sacramento since 1984, worked as an IRS tax auditor for six years. He’s a past chairman of the California Society of CPAs. Ask him a question.

Daniel Tahara

Daniel Tahara takes your questions about California taxes. Tahara, a spokesman for the state Franchise Tax Board, has 10 years of experience as a tax auditor. Ask him a question.



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