On Form 1098-T, the parent claims the tuition information if the student is their dependent for that tax year; if no one claims the student as a dependent, the student reports the 1098-T on their own return. The form itself is always issued in the student’s name and Social Security number, but the name on the form doesn’t decide anything. Dependency status does.
Dependency Decides, Not Who Wrote the Check
There is no option to split the education credit between a parent and a student, and no option to assign it to whoever paid the bill. The IRS ties the benefit to dependency status, full stop. If you claim the student as a dependent, only you can claim the credit tied to that 1098-T. If no one claims the student, only the student can.
The rule that closes the loop: the IRS treats all qualified education expenses paid by or on behalf of a dependent student as paid by the taxpayer who claims the dependent.1Internal Revenue Service. Instructions for Form 8863 – Education Credits (American Opportunity and Lifetime Learning Credits) So even when the student pays tuition from their own account, or a grandparent writes the check directly to the school, those payments count as the parent’s for credit purposes as long as the student is the parent’s dependent.
When the Parent Claims It
To claim a college student as a qualifying child dependent, the IRS applies five tests: relationship, age, residency, support, and joint return. For a full-time student, the age test is met if the student is under 24 at year-end. The support test requires that the student did not provide more than half of their own financial support during the year.2Internal Revenue Service. Publication 501 – Dependents, Standard Deduction, and Filing Information
If those tests are met and you claim the student on your return, the student cannot claim any education credit on their own return. The 1098-T goes with you.
When the Student Claims It
If nobody claims the student as a dependent, only the student can claim the education credit.1Internal Revenue Service. Instructions for Form 8863 – Education Credits (American Opportunity and Lifetime Learning Credits) A student typically isn’t a dependent when they are 24 or older, aren’t enrolled full-time, or cover more than half of their own living costs. Parents who pay tuition for a non-dependent student don’t get to claim those payments. The credit follows the student.
Student Loans and the Support Test
Loans are where families most often misread the support question. A loan the student takes out alone, with only the student legally responsible for repayment, counts as the student’s own support. A loan the parent takes out or co-signs counts as support from the parent. For a student carrying large loans in their name alone, the loan proceeds can push their own contribution past the 50% mark and disqualify them as a dependent. That flips the credit from the parent’s return to the student’s.
Divorced or Separated Parents
When more than one person could claim the same student as a qualifying child and they can’t agree, the IRS applies tie-breaker rules. The parent the child lived with longer during the year gets priority. If time was equal, the parent with the higher adjusted gross income wins. If only one of the competing claimants is a parent, the parent wins. Whoever claims the child under those rules is the one who claims the 1098-T.
What Credit the 1098-T Feeds Into
Whoever ends up with the 1098-T uses it to calculate one of two credits on Form 8863: the American Opportunity Tax Credit or the Lifetime Learning Credit.3Internal Revenue Service. About Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits) You can claim only one credit per student per year.
The AOTC is worth up to $2,500 per eligible student: 100% of the first $2,000 in qualified expenses and 25% of the next $2,000. Up to $1,000 of it is refundable. It is limited to the first four years of postsecondary education, and the student must be enrolled at least half-time in a degree or credential program.4Internal Revenue Service. American Opportunity Tax Credit
The Lifetime Learning Credit gives up to $2,000 per return (not per student), calculated as 20% of the first $10,000 in qualified expenses. It is nonrefundable. There is no year limit and no half-time enrollment requirement, and the student doesn’t need to be pursuing a degree, which makes it the option for graduate school, fifth-year seniors, and single courses.5Internal Revenue Service. Lifetime Learning Credit
Both credits phase out at the same modified adjusted gross income levels: full credit at $80,000 or less ($160,000 joint), reduced from $80,000 to $90,000 ($160,000 to $180,000 joint), and none above $90,000 ($180,000 joint).4Internal Revenue Service. American Opportunity Tax Credit1Internal Revenue Service. Instructions for Form 8863 – Education Credits (American Opportunity and Lifetime Learning Credits) Those thresholds matter when comparing a parent’s income to a student’s: a household above the phase-out gets nothing on the parent’s return, while the same 1098-T on a low-income student’s return could produce a refundable credit.
Married Filing Separately Blocks the Credit
Married couples who file separately cannot claim either education credit. The statute requires a joint return for married taxpayers.6Office of the Law Revision Counsel. 26 U.S. Code 25A – American Opportunity and Lifetime Learning Credits This trips up families who file separately to keep an income-driven student loan payment low: choosing MFS also throws away the education credit for that year.
When Shifting the Scholarship Helps the Parent
Scholarships and grants reported in Box 5 reduce the qualified expenses available for the credit.7Internal Revenue Service. Education Credits – AOTC and LLC If scholarships cover all tuition and fees, the parent claiming the dependent may have zero qualified expenses left to use.
Families sometimes fix this by having the student voluntarily treat part of a tax-free scholarship as taxable income on the student’s return. Doing so frees up qualified expenses on the parent’s return. Shifting $4,000 of scholarship from tax-free to taxable, for example, gives the parent $4,000 in qualifying expenses and supports the full $2,500 AOTC. Only amounts used for tuition and required materials are eligible for tax-free treatment in the first place; amounts used for room and board are always taxable regardless.8Internal Revenue Service. Topic No. 421, Scholarships, Fellowship Grants, and Other Grants
The move only pays off when the student’s tax on the extra income is less than the credit the parent picks up. A student in the 10% or 12% bracket paying $400 to $480 more in tax so the parent gets $2,500 back is a clear win. Run it both ways before filing.
Don’t Let Both Returns Claim the Same Expenses
The most common way families get in trouble here is having both the parent and the student claim the credit for the same expenses in the same year. If the IRS finds an AOTC claim was reckless or showed intentional disregard for the rules, the taxpayer is banned from claiming the credit for two years. A fraudulent claim triggers a ten-year ban.9Internal Revenue Service. Instructions for Form 8862 After the ban lifts, Form 8862 has to be attached to the return to prove eligibility again.10Internal Revenue Service. Understanding Your CP79A Notice
Settle the dependency question first. Whoever claims the student claims the 1098-T. The other return leaves it off.