Life changes
Your Child Started College: Credits, Forms and Who Claims What
College opens two education credits and a few new forms. Which parent or student claims them, and how the 529 money was used, decides how much of the benefit you keep.
Reviewed by LaToya Clark-Thompson, FounderLast updated
What changes on your return
A full-time student under age 24 can generally stay your qualifying child, so the dependency itself usually does not change. What is new are the education benefits, claimed on Form 8863:
- The American Opportunity Tax Credit, for the first four years of college. It is partly refundable and covers tuition, required fees and course materials.
- The Lifetime Learning Credit, for any post-secondary or job-skills course, with no limit on the number of years. It is nonrefundable.
You can claim only one of the two credits per student per year, and both phase out at higher incomes. The credit goes to whoever claims the student as a dependent. If you claim your child, you take the credit even if the student paid the tuition.
Forms that show up
- Form 1098-T from the school, showing payments and scholarships. It is a starting point, not the final word; your own payment records decide what you paid during the tax year.
- Form 1099-Q for any 529 plan or education savings account withdrawal
- Form 1098-E later, once student loan interest is being paid
- The student’s own W-2 if they work, and possibly their own return
Scholarships and 529 withdrawals
Scholarships used for tuition and required fees are tax-free. Scholarship money used for room and board is taxable to the student. Sometimes, if your income allows, it is better to treat part of a scholarship as taxable so more of the tuition can count toward the American Opportunity credit. That trade-off is worth having a preparer calculate.
A 529 withdrawal is tax-free when it is used for qualified expenses, but the same dollar cannot pay for expenses used for the credit. Plan the 529 to cover room, board and other costs, and leave enough tuition paid from other money to support the credit. South Carolina offers a state deduction for contributions to its Future Scholar 529 plan, so bring the contribution statement too.
What to bring to your appointment
- Form 1098-T for each student, and the school’s account statement showing what was paid and when
- Receipts for required books and course materials
- Any Form 1099-Q and records of what the withdrawal paid for
- Scholarship and grant award letters
- The student’s W-2 or other income, so we can see whether they need to file
Common mistakes, and when to get help
- The student claiming the credit on their own return while a parent still claims them as a dependent
- Using Box 1 of the 1098-T without checking when payments were actually made
- Paying tuition and room entirely from the 529, leaving nothing to claim the credit on
- Claiming the American Opportunity credit after the student has already used it for four years
The interaction between the credit, scholarships and 529 money is the part where a preparer earns their keep. Bring every form for both you and the student and we prepare the returns so they agree. For a student who just took their first job, see first job. Book through tax preparation.
Frequently asked questions
Who claims the 1098-T, me or my college student?
Whoever claims the student as a dependent claims the education credit, even if the student paid the tuition. If you are entitled to claim your child but choose not to, the student may be able to claim it on their own return. Only one return can take the credit for that student, so parents and students should decide together before either files.
Can I use a 529 and still get the American Opportunity credit?
Yes, but not on the same expenses. Tuition paid with 529 money cannot also count toward the credit. Many families pay part of tuition from income or savings, enough to support the full credit, and use the 529 for the rest of tuition and for room and board. We look at your 1099-Q and 1098-T together to split them correctly.
Are college scholarships taxable?
Scholarships and grants used for tuition, required fees and course materials are generally tax-free. The portion that pays for room, board or travel is taxable income to the student. Sometimes it helps to treat part of a scholarship as taxable so more tuition qualifies for the education credit. Bring the award letters and we compare both ways.
Does my college student need to file a tax return?
It depends on their income. A student with a job may need to file to get back withholding even if they owe nothing, and taxable scholarships count as income too. A dependent student should check the box saying someone else can claim them. We can prepare the student’s return alongside yours so both agree on who claims the credit.
Not the question you had? The full tax FAQ covers more ground, and our client reviews say what the work is actually like.
Related pages
Your child is getting older
Why the refund drops when a child ages out of credits, and what still applies.
Learn moreYou had a baby
Child tax credit, dependent care, filing status and the Social Security number you need first.
Learn moreSingle parent, head of household
The head of household tests, who counts as a qualifying person and the mistakes to avoid.
Learn moreYou started your first job
First W-2, first W-4, first return. How it works when your parents still claim you.
Learn morePart of Life Changes & Your Taxes. Not sure which service fits? Answer a few questions.
Tell us what you need
Send a short note about your situation and we’ll come back to you with a straight answer — whether that’s a quote, a next step, or a referral if it isn’t something we handle.
Prefer to talk it through first? Book a consultation and we’ll find a time, in the Easley office or virtually.
Something changed? Bring it to us before you file.
Call (864) 781-4035 or book a consultation, in the Easley office or virtually.