Can I claim myself as indepdent?

[kay_b1199]

I am a 19 year old college student. I got a full-ride scholarship that also included indirect costs, which were paid to me as a direct deposit straight into my bank account. I also have plenty of money I saved up from when I was actively working that I use for other things I need and my parents don't pay for any of my living expenses at all, including food, boarding, medical expenses, etc. My mother and father both agree that they would like to but they dont pay for anything. Would they still qualify to claim me as a dependent or can I claim myself as an independent?

[Critter-3]

You are still their dependent since you are still in school and are NOT paying for more than 1/2 your support by working.  What you get in scholarships or what you take out of  your savings do not count towards support.   Besides,  if you are not working you have no reason to file a return. 

[Hal_Al]

Critter-3's answer is probably correct, you probably still qualify as their dependent.  I disagree  with one statement: what you take out of  your savings DOES count towards support. 

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, student status, a relationship test and residence test.  The support test is different for each type. The support test, for a QC, is only that the child didn't provide more than half his own support. The support test for a Qualifying Relative is that the taxpayer provided more than half the relative's support.

A child of a taxpayer can still be a “Qualifying Child” (QC) dependent, regardless of his/her income, if:

1. He is under age 19, or under 24 if a full time student for at least 5 months of the year, or is totally & permanently disabled
2. He did not provide more than 1/2 his own support. Scholarships are excluded from the support calculation
3. He lived with the parent (including temporary absences such as away at school) for more than half the year

So, it doesn't matter how much he earned. What matters is how much he spent on support. Money he put into savings does not count as support he spent on him self. Money he takes out of savings, and spends, DOES count towards support. 

The support value of the home, provided by the parent, is the fair market rental value of the home plus utilities & other expenses divided by the number of occupants.

The IRS has a worksheet that can be used to help with the support calculation. See: http://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf

You are not allowed to claim the refundable tuition credit, because of restrictions on students under 24.  But you parents can (probably) claim the tuition credit of up to $2500 (in addition to the $500 dependent credit) if you are their dependent.

Even though you're on full scholarship, there is a tax “loop hole” available. The student reports all his scholarship, up to the amount needed to claim the American Opportunity Credit (AOC), as income on his return. That way, the parents  (or himself, if he is not a dependent) can claim the tuition credit on their return. They can do this because that much tuition was no longer paid by "tax free" scholarship.  You cannot do this if the school’s billing statement specifically shows the scholarships being applied to tuition or if the conditions of the grant are that it be used to pay for qualified expenses.

Using an example: Student has $10,000 in box 5 of the 1098-T and $8000 in box 1. At first glance he/she has $2000 of taxable income and nobody can claim the American opportunity credit. But if she reports $6000 as income on her return, the parents can claim $4000 of qualified expenses on their return. It only takes $4000 of expenses to get the full $2500 credit.