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Dependency rules The student does not get to claim themselves on their tax return, but the value of the education credit may make it preferable for the parent to forfeit their claim of the child as a dependent.

To be eligible for AOTC, the student must: Be pursuing a degree or other recognized education credential. Be enrolled at least half time for at least one academic period beginning in the tax year. Not have finished the first four years of higher education at the beginning of the tax year.

Taking advantage of an education assistance program can impact your taxes. Federal tax law allows employees to get up to $5,250 in tuition reimbursement tax free from their employer every year.

If your student is employed, you should not claim their earned income on your return. If your student files their own tax return, you can still claim them as a dependent, but you shouldn't claim their income on your return.

Any student who does not satisfy the criteria for independent student status is considered to be a dependent student, even if the student is financially self-sufficient, does not live with his parents and claims himself as an exemption on his own federal income tax return.

American Opportunity Tax Credit The AOTC is figured by taking the first $2,000 paid towards the student's qualified educational expenses and adding 25 percent of the next $2,000 in educational expenses, up to $2,500. Up to $1,000 (or 40 percent of the total credit) is refundable even if a filer doesn't owe income tax.

If your employer pays more than $5,250 for educational benefits for you during the year, you must generally pay tax on the amount over $5,250. Your employer should include in your wages (Form W-2, box 1) the amount that you must include in income.