1098 student vs parent

[Angmom]

My student was full time in Spring 2024 for 5 months, then graduated and went to work. We paid his tuition, books,  living expenses, etc. He got a job in June. If his tuition is included, we paid over 50 percent of his 2024 support. So do we claim him (if he is not claiming himself) and the 1098 distribution for that semester goes on our taxes?

[MindyB]

Yes, you can claim him and report the 1098-T, as long as he is under 24.   Make sure you check the box that he was a full-time student in 2024 in the ‌ interview section .  The definition of full time student is "5 months or more" so being a student through May qualifies.

Here are the rules for a qualifying child, from Rules for Claiming Dependents on Taxes:

• "Are they related to you? The child can be your son, daughter, stepchild, eligible foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister, adopted child or an offspring of any of them.
• Do they meet the age requirement? Your child must be under age 19 or, if a full-time student, under age 24. There's no age limit if your child is permanently and totally disabled.
• Do they live with you? Your child must live with you for more than half the year, but several exceptions apply.
• Do you financially support them? Your child may have a job, but they cannot provide more than half of their own support."

[Hal_Al]

Q. So do we claim him (if he is not claiming himself) and the 1098 distribution for that semester goes on our taxes?

A. Yes, if he continued to live with you thru July 3rd and he's under 24 (on 12-31-24). 

Can the student be claimed as a dependent in the Graduation year?

If he/she was a student (under 24) for at least 5 months and lived with you for more than half the year, and did not provide more than 1/2 his own support for the whole year, you can still claim him. Be sure he knows you're claiming him, so he doesn't claim himself. He can only be claimed once. But, he can "file taxes" without claiming his own exemption.

The real question is who should be claiming him in this "transition" year to adulthood. You two have to agree on who is going to claim his exemption. Each should do their taxes both ways and see which way the family comes out best.  Even then, you have to meet the rules. 

There are two types of dependents, "Qualifying Children"(QC) and Other ("Qualifying Relative" in IRS parlance even though they don't have to actually be related). There is no income limit for a QC but there is an age limit, student status, a relationship test and residence test. Only a QC qualifies a taxpayer for the Earned Income Credit.

The rule is that a child of a taxpayer can still be a “Qualifying Child” dependent, regardless of his income, if:

1. he is a full-time student under 24 for at least 5 calendar months of the year (graduating in May usually means you meet the 5 month rule)
2. he did not provide more than 1/2 his own support  (scholarships are considered 3rd party support and not support provided by the student). 
3. lived with the parent (including time away at school) for more than half the year

So, it usually hinges on "Did he provide more than 1/2 his own support in 2024.  Yes tuition counts as support. Expenses paid by scholarships do not count as support. 

The support value of the home you provided is the fair market rental value of the home plus utilities & other expenses divided by the number of occupants. IRS Publication 501 on page 20 has a worksheet that can be used to help with the support calculation. See: http://www.irs.gov/pub/irs-pdf/p501.pdf  (page 15)