Pay For College

pay for college
If I pay college tuition for my sister is it tax deductible or can I claim tax credits ?

Or is there any state tax o any federal benefits for me to claim?

Who claims your sister as a dependent? That person can take the deductions or credits for education, even if that person is not you.

If your sister is your dependent, then any of the tax benefits for education are available to you. You may be able to take the Hope Credit of up to $1,650 reduction in taxes, or the Lifetime Learning Credit of up to $2,000 in taxes, or a tax deduction for Tuition and Fees of up to $4,000.

The details are fully and clearly explained in IRS Publication 970 Tax Benefits for Education

http://www.irs.gov/pub/irs-pdf/p970.pdf

If your sister is not your dependent, then you could establish a 529 plan through your state and have the tuition money be deposited into the 529 plan and then paid out of the 529 plan. This will give you some state tax benefits, but no federal benefits.

For federal benefits, you could establish a Coverdell Savings Account and deposit up to $2,000 per year to pay for your sister’s education. Contributions are not tax deductible but earnings are tax free when distributed for education.

Both the 529 plans and Coverdell accounts are explained in the publication above.


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