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Author: bootchk Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121564  
Subject: Re: sudent credit splitable? Date: 2/22/2005 11:10 AM
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I want to make sure I understand what you said.

Suppose the parents paid more than half the child's expenses, the child is a full-time student and less than 24. So the parents can optionally claim a (dependency) exemption for the child. They don't have to, but they can?

If the parent's don't claim an exemption for the child, the child can claim a personal exemption? But you said if the child claims an education credit, the child can't claim a "dependency exemption" ? Do you mean they can't claim a personal exemption? Why not, because the child COULD be claimed as a dependent on their parents return, even though they weren't?

If you answer, please throw out some rough numbers for a situation where it might pay for the child to claim the education credit even thought the child is a dependent. For example, if the parents AGI is $50k, the child's AGI is $4k earned (summer and part time), tuition paid is $4k (an in-state school), is that even in the ball park where the child should claim the education credit? Yow tax strategizing is a pain.

Also, please throw out a rule of thumb for deciding when to stop supporting your child as a tax strategy. Something like "As long as you can contribute more than half of the child's living expenses, you will save your marginal tax bracket percent of that (eg 15-30%) in taxes on the first $2000 (the amount of a dependency exemption?) less the child's tax bracket percent (say 10%). So if you are going to give the money to the child anyway, you might as well do it while you can claim them as a dependent and they are in a low tax bracket." Is that close to a reasonable strategy? Please refer me to a good discussion of this.
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