Last year's economic stimulus package and tax-cut extensions provided ways for American individuals and families to save money when filing 2010 tax returns. In addition to giving relief to laid-off workers and tax breaks for energy improvements to homes, the rising cost of college was not lost on lawmakers, who allowed various credits and deductions to help families with college tuition and expenses.

My Kid Started College. What Are the Things I Need to Know When I File Our Returns?

Several options are on the table. Parents need to take a close look, or work with an accountant, to determine the savings plan that is best for them.

H&R Block provides information on some of the education tax benefits that have been extended through 2012 as a result of the stimulus package:

  • The American Opportunity Credit (AOC) allows for a partial refund up to $2500 for the first four years of college.
     
  • The Coverdell Education Savings Account allows tax-exempt distributions for secondary education expenses that qualify.
     
  • The Student Loan Interest Deduction is a deduction up to $2500 of qualified interest.

Make sure to enter our giveaway of H&R Block tax preparation package!

Relatives Made a Gift to My Son and I Invested It. Does He Have to File a Return?

According to the IRS website, parents who are able to include child's interest and dividend income on their own tax returns will not have to file one on the child. Parents may be able to claim the interest and dividend income on their own tax return.

Some of the conditions that apply:

  1. Investment income was greater than $1900.
  2. The child was 19 or under at the end of 2010.
  3. The child does not file a joint return.
  4. You are the qualifying parent.

If the conditions above and others listed in the IRS rules do not apply, the child may be required to file a return.

H & R Block helps guide parents to the correct forms for a child's investment return or other earned income:

For reporting your child's investment income on a separate return, you must use Form 1040 (or Form 1040A, if applicable) and include Form 8615.

"If your child has earned income or received proceeds from the sale of stock reported on Form 1099-B, you must:

  • File a separate return for your child.
  • Use Form 8615 to compute the tax on your child´s income."

Different forms may be filed for different children — you can file Form 8814 for one child and Form 8615 for another.

More Tax Information and Resources for Parents:

Some of this tax information is courtesy of H & R Block.

This post is for informational purposes only. Parenting Squad and its authors do not provide any legal or financial advice.

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