Should I forgo a dependent exemption so my child can take the American Opportunity Credit?

If you have a child in college, you may not qualify for the American Opportunity credit on your 2017 income tax return because your income is too high, (modified adjusted gross income) phaseout range of $80,000 - $90,000 for unmarried individuals and $160,000 - $180,000 for joint filers. Regardless of your income, you are not eligible for the credit if you use married filing separate status.

Your child might be able to claim the credit.

The maximum credit, per student, is $2,500 per year for the first four years of postsecondary education.

There's one potential downside: If your dependent child claims the credit, you must forgo your dependency exemption for him or her - and the child can't take the personal exemption.

But because of the exemption phaseout, you might lose the benefit of your exemption anyway. The 2017 adjusted gross income thresholds for the exemption phaseout begins at $261,500 (singles), $287,650 (heads of households), $313,800 (married filing jointly) and $156,900 (married filing separately).

If your exemption is fully phased out, there likely is no downside to your child taking the credit. If your exemption isn't fully phased out, compare the tax savings your child would receive from the credit with the savings you'd receive from the exemption to determine which break will provide the greater overall savings for your family.