It seems to me that with the new 2018 tax laws eliminating personal exemptions, there is little if any gain to including children over 17 as dependents anymore? Or am I missing something (that seems more likely :-)). We are supporting our son in University at about a 70/30 rate, but if there is no advantage to us then I'm considering doing 100% this year and then only 30% next year so he can start claiming a full standard deduction on his 2019 taxes (he would then use his personal savings from this year towards next year's costs, resulting in a 30/70 split instead of the current 70/30).
YOu still claim the dependent as such ifyou qualify, as that has not changed. What has changed is that you don't get the monetary dependent exemption, is all.
If you don't claim the dependent, then you can not claim any of the education credits for that dependent either. Worse, the dependent can't claim them either. Those credits are just lost and gone. Period.
We are supporting our son in University at about a 70/30 rate
I don't see why that matters. If you read IRS Publication 17, you'll see that there is no requirement for the parents to provide any support to the student what-so-ever. Not one single penny. The support requirement is on the student, and only the student. Basically, it reads as follows:
If the student did not provide more than 50% of the student's own support, then the parents qualify to claim the student as a dependent on the parents tax return. Scholarships, grants, 529 funds, gifts from Aunt Mary, etc. *do not count* for the student providing their own support.
Now with that said, there are only two possible ways the student can provide more than 50% of their own support.
- The student has a job or is self-employed and earns at least half of there necessary expenses in the same tax year those expenses are paid. Necessary expenses are things like qualified education expenses, room, board, food, clothing, transportation, and a few other things. Costs incurred by the student for thigns like a Caribbean Cruise over spring break and a trip to Vegas during the summer are *not* support costs, any way you look at it.
- The student has sufficient student loans on which the *student* is the *primary* borrower, and a sufficient amount of that loan money is distributed to the student in the tax year so as to pay more than 50% of their support not covered by other things such as scholarships, grants, 529 funds, etc.
So with that, it is perfectly possible for a student to earn or borrow a million dollars in the tax year, and yet still qualify to be claimed as a dependent on the parent's tax return.
Understand also that the key word in the publication is *qualify*. There is nothing that says the parents absolutely must claim the student as a dependent. But if the student "QUALIFIES" to be claimed a a dependent on the parent's tax return, then the student can not claim any of the education credits.
Finally, under all circumstances, your student will qualify for their $12,000 personal exemption. Nothing cancels that out.
Thanks Carl! In my case my child is studying overseas with a non-USA University, so we don't get any of the education credits anyways. But I didn't realize that he could still claim the full $12000 standard deduction as a dependent, so there really isn't any advantage to not claiming him either. Thanks for taking the time to respond.
Just because your dependent student is studying abroad at a foreign institution, does not mean you don't qualify for education credits. Many, many foreign institutions are in fact, eligible educational institutions. For example, Norwich University of the Arts in Britain is an eligible institution, as is University of Jahannesberg in South Africa. Now you may already know this stuff and have in fact confirmed that where your student is enrolled is not an eligible institution. But I point it out, just in case.
See the list at https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/eligible-educational-ins... and keep in mind that just because it's not on that list, does not mean it's not an eligible institution.