23 year old college graduate (should I claim?)
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Level 1

23 year old college graduate (should I claim?)

I am trying to decide if my college-grad daughter should still be claimed as my dependent on my return for 2020...I don't see any benefit other than the $500 'other dependent credit' on my 2019 return, at least nothing I can identify

 

I know the rules and technically I can claim her, I am trying to understand if I should.   She provides  ~50% of her own support and we can make the case both ways.  she has a job but still lives at home

 

what would I lose if I stop claiming her given I don't get the $2000 child credit as she is over 17?

4 Replies
Level 15

23 year old college graduate (should I claim?)

If your 23 year  old is/was  a full-time college student  in 2020 you get the $500 credit for other dependents AND you are the one who can claim the education credits on your own tax return if you claim her as a dependent.  If you itemize deductions then any out of pocket medical expenses you paid for your dependent can be entered.

 

If she graduated in 2020 and has begun earning money then you need to determine if you have paid for over half her support in 2020 -- it's tricky in the year of graduation.

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**
Level 1

23 year old college graduate (should I claim?)

 

thank you for replying!

 

I don't qualify for the education credits nor do I itemize.  From what I can tell I get only the $500 other dependent credit so it may be better for her if I don't claim her.  If my daughter was no longer a dependent I would lose the $500, but she would then maybe qualify for the education credit and also the stimulus money.  She lived out of state for school and work from January-Sept 2020 and is now working though living back home (we charge her rent).  I could make the case that she supported herself for >50% of 2020.

 

Level 15

23 year old college graduate (should I claim?)

You do not get stimulus money for a 23 year old.  SHE can get it on her own return if not claimed as your dependent.

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**
Level 15

23 year old college graduate (should I claim?)

Sometimes the answer can be complicated. But with stimulus money on the table and you not  qualifying for the education credit,  the answer is fairly simple: it's better if she claims herself.  You are correct, you only get the $500 other dependent credit.

 

With the tax law change, effective 2018, most students will get the same refund whether they claim themselves or not. The personal exemption has been eliminated and the standard deduction increased.  However, not being a dependent means she can claim the stimulus and education credit.  Note: any American Opportunity Credit you claimed when she was a dependent counts toward the 4 time limit for her claiming it. She may have to settle for the lesser Lifetime Learning Credit.

 

But, then come the question of can she legally do that. If she qualifies as your dependent, she cannot claim herself and the tax benefits that come with that. 

 

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. 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 2020.

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

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