I am a college student. I do live with them when I am not in school (which will be summer breaks, certain holidays, Christmas break). I don't pay any rent or utilities when I live with them or food (but I also tend not to eat with them), I do pay all my other bills (insurance, medical bills, etc). I pay the remainder of my tuition, for all my books, and all other expenses of mine.
The simple answer is yes. The parents of most college students can still claim them. But, the dependent rules must be met.
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.
A child of a taxpayer can still be a “Qualifying Child” (QC) dependent, regardless of his/her income, if:
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.
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