For divorced parents, only the parent that claims the child on his or her federal tax returns can claim any tax credits for higher education expenses offered by the IRS. The only real tax advantage for college expenses paid by divorced parents is if neither parent claims the child as a dependent.
Dependent Students Custodial Parent
A dependent student is a student for which someone else, such as a parent, can claim as a dependent on his or her tax returns. The parent who can claim the child as a dependent is typically the custodial parent. The custodial parent is the parent with whom the child resides with for more than six months out of the year. When a custodial pays for the child's higher education expenses, she can claim the tax credits and deductions.
Dependent Students Non-Custodial Parents
The non-custodial parent is whom the child resides with for less than six months of the year. A non-custodial parent cannot typically claim a child as a dependent on her taxes unless the custodial parent files a Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent IRS Form 8332. Absent of IRS Form 8332, if the non-custodial parent pays for the child's higher education expenses, he cannot take any tax credits or deductions related to those expenses.
Independent Students
If neither of the parents claims their child as a dependent on their federal tax returns, the child can claim the higher education tax credits and deductions for the college expenses paid on her behalf. The IRS views tuition paid by someone else on behalf of the student the same as if the student paid the tuition herself. This means that if a relative such as a grandparent or aunt paid for her some of her tuition expenses, she can also claim the tax credits and deductions on those amounts.
Considerations
Parents who are divorcing who have multiple children may want to consider splitting the right to claim the children as dependents between the two of them. For instance, at the time of the couple's divorce, they have two children, one boy and one girl. The parents agree in the divorce decree that the mom will claim the girl as a dependent for tax purposes and the dad will claim the boy. Splitting the right to claim the children as dependents for tax purposes allows each parent to take advantage of the tax credits and deductions for higher expenses. The mom receives the credits when the daughter goes to college and the dad does not. When the son goes to college, the dad receives the credits and the mom does not.
Tags: credits deductions, child dependent, higher education, claim credits, education expenses, higher education expenses