We received a 1098-T in my daughter's name for her final graduate semester. I've always entered this amount on our taxes as she was a dependent. For 2020 that is no longer the case. Not sure what the legal requirements are and/or if we have flexibility as to who claims it. Not a huge amount of money but want to do things correctly.
If your daughter is longer your dependent (for example because she is 24 or older), she only can claim her education expenses on her form 1098-T.
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Why is she nolonger a depedent?
Be advised that grad students are not eligible for the refundable credit (American Opportunity Credit). So, she would have to have had enough income to have a tax liability for the Lifetime Laerning credit to do her any good.
There are two types of dependents, "Qualifying Children"(QC) and standard ("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 and student status test, a relationship test and a residence test. Only a QC qualifies a taxpayer for the Earned Income Credit and the Child Tax Credit. Turning 24 only means she can no longer be a QC.
A person can still be a Qualifying relative dependent, if not a Qualifying Child, if he meets the 6 tests for claiming a dependent:
- Closely Related OR live with the taxpayer ALL year
- His/her gross taxable income for the year must be less than $4300 (2020).
- The taxpayer must have provided more than 1/2 his support
In either case:
- He must be a US citizen or resident of the US, Canada or Mexico
- He must not file a joint return with his spouse or be claiming a dependent of his own
- He must not be the qualifying child of another taxpayer