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No trade-off for higher education credit

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in Small Business Tax

Q. Can I waive the rights to the American education credit to my son in college? C.S., Sarasota, Fla.

A. Sort of. We assume you are precluded from claiming a higher education tax credit yourself because your modified adjusted gross income (MAGI) is too high. For 2015, the American Opportunity Tax Credit (AOTC) isn’t available to a single filer with MAGI of more than $90,000 or a joint filer with MAGI above $180,000. But you can’t simply “give” the AOTC to a child who is your dependent. To do that, you must forgo claiming a dependency exemption deduction for your child. Then your child is entitled to claim the AOTC on his or her own return, even if you paid all the tuition bills.

For 2015, the dependency exemption deduction is $4,000. However, the deduction may not be worth much or anything to you, because it can be partially or completely phased out for higher-income folks. In that case, forgoing the dependency exemption deduction may be relatively painless for you.

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