Is my daughter eligible for the education tax credit?

Q: My oldest daughter will be graduating from college in May of this year. I have claimed her for the last two years, her father prior to that (divorced parents). We have never been eligible for the education tax credit. If I do not claim my daughter this year, will she be eligible to claim the education tax credit herself? --Jane, Acushnet

The following answer was provided by Janis Orel, CPA, Abrams Little-Gill Loberfeld PC.

A: If you are eligible to claim her as a dependent - which you are, then you must do so, or loose the exemption. By claiming her as a dependent, that qualifies you for the education credit and not her.

The only way for her to claim the credit is if she were out on her own and supporting herself.

The following answer was provided by Barbara Damon, CPA, Edelstein & Company, LLP.

A: If you do not claim her as a dependent, even though you are entitled to the dependency exemption, she can take the education credits. However she cannot take the personal exemption on her return. This means the dependency exemption is completely lost. This is the type of scenario that works best when the parents' income is high enough that the dependency exemption is phased out.

If you receive a benefit from having her as a dependent you may have to compare which method yields the lowest combined tax.