The Internal Revenue Code has several provisions designed to help individuals and families cover college costs. These include education credits such as the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC), which lessen the tax burden on individuals.

Given the rising costs of college and higher education these days, you can’t be too well-informed about all the available tax benefits related to higher education.

To help you out, TaxGlobal has put together answers to some of the most common questions about taxes and higher education. Remember, if your questions aren’t answered here, you can always ask on our platform.

Q: When Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, is used, who is entitled to claim the American Opportunity Tax Credit (AOTC) – the custodial parent or the parent claiming the child?

A: The parent claiming the child as a dependent is eligible for the AOTC.

Q: In the scenario where grandparents initiate a 529 plan and use it for their grandchild's college expenses, how is this managed in their tax return, considering the grandchild is not claimed as a dependent?

A: The distribution from the 529 plan is non-taxable if it was applied to qualified education expenses for the designated beneficiary (grandchild), even if the grandparents do not claim the grandchild as a dependent. In cases where the entire distribution is non-taxable, the grandparents are not required to report anything on their tax return.

Q: If a taxpayer enrolls in only one course at an eligible college, do they still qualify for the Lifetime Learning Credit?

A: Yes, the Lifetime Learning Credit is applicable even if the taxpayer registers for only one course or multiple courses.

Q: Does attending a beauty salon school meet the criteria for a vocational school?

A: Yes, it qualifies as a vocational school if the institution is eligible to participate in federal financial aid programs.