College student aged out per IRS dependent rule, attending college and being financially supported (no earned income

[TaxGal7]

College student, 29 years of age, has exhausted AOTC. Will be financially supported to attend school (living at home, tuition and related expenses paid by parent). 

Q1: Parent can no longer claim child as dependent, correct?

A1: Yes or No

Q2: Is child reflected with independent student status, should file his/her own taxes, deduct all education expenses per the college's 1099-T? 

A2: Yes or No

Q3: Are there any deduction for educational expenses that can be claimed on parent's return?

A3: Yes or No. If yes, explain.

Q4: What other tax filing considerations are there for either parent, child or both, in response to the above described scenario?

A4: Describe.

[DoninGA · Accepted solution]

They can still be claimed as a dependent under the Qualifying Relative rules if their gross income for 2024 was less than $5,050 and you provided over one-half of their support.  Under the rules you would be eligible for the Other Dependent Credit of $500.

To be a Qualifying Relative -

1. The person cannot be your qualifying child or the qualifying child of any other taxpayer. A child is not the qualifying child of any other taxpayer if the child's parent (or any other person for whom the child is defined as a qualifying child) is not required to file an income tax return or files an income tax return only to get a refund on income tax withheld.
2. The person either (a) must be related to you or (b) must live with you all year as a member of your household.
3. The person's gross income for the year must be less than $5,050 (social security does not count) in 2024
4. You must provide more than half of the person's total support for the year.
5. The person must be a U.S. citizen or a U.S., Canada, or Mexico resident for some part of the year.
6. The person must not file a joint return with their spouse with the following exception -
You can claim a person as a dependent who files a joint return if that person and that person’s spouse file the joint return only to claim a refund of income tax withheld or estimated tax paid.

[Hal_Al]

Q1: Parent can no longer claim child as dependent, correct? Yes or No.

A1: No. Parent can no longer claim the child as a "Qualifying Child" Dependent. Parent may still be able to claim the child under the "Qualifying Relative" 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 and the Child Tax Credit. They are interrelated but the rules are different for each.

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.

See full dependent rules at: https://turbotax.intuit.com/tax-tools/tax-tips/Family/Rules-for-Claiming-a-Dependent-on-Your-Tax-Ret...

Q2: Is child reflected with independent student status, should file his/her own taxes, deduct all education expenses per the college's 1099-T? Yes or No.

A2: No. There are no longer (since 2018) any actual education "deductions". There are two education/tuition credits. Only the American Opportunity Tax Credit (AOTC) is refundable and he (or his parents) has used up his four allowed AOTC claims. He can only claim the Lifetime Learning Credit (LLC) if he has an actual tax liability. 

Q3: Are there any deduction for educational expenses that can be claimed on parent's return? Yes or No.

A3: No. The parent can only claim the credit, if the student is their dependent. So, yes if the student is the parent's qualifying relative dependent. 

Q4: What other tax filing considerations are there for either parent, child or both, in response to the above described scenario?

A4: Basically, none.  Be aware that  the education credit goes with the student's exemption (dependency). If you claim him; you claim the credit.  If he claims himself, he claims the credit.  This is regardless of who actually pays for the education.  Although the general rule, in taxes, is that you must be the one making the payment, to get the deduction or credit, there is an exception for education. If you can't claim him, and he doesn't have enough income to owe taxes, then the education credit is just lost.