Dependent vs Independent Student

[ermcdon]

Hello,

I am a first year full time college student earning about $18,000/year. I live at home, but I am paying for college completely on my own. I am debating filing independent this year instead of having my parents claim me as dependent. From my understand, I would be able to claim some of the previous stimulus payments, and claim education related tax credits that would benefit myself. Would you suggest filing independent, or having my parents claim me as dependent?

[ColeenD3]

It is not a choice. If you qualify as a dependent, you are a dependent. There is no gross income test for a qualifying child, but there is a support test. You have to examine all that you contribute to your own support vs what your parents contribute. The IRS provides a worksheet.

Qualifying Child

Relationship — the taxpayer’s child or stepchild (whether by blood or adoption), foster child, sibling or step-sibling, or a descendant of one of these.

Residence — has the same principal residence as the taxpayer for more than half the tax year. Exceptions apply, in certain cases, for children of divorced or separated parents, kidnapped children, temporary absences, and for children who were born or died during the year.

Age — must be under the age of 19 at the end of the tax year, or under the age of 24 if a full-time student for at least five months of the year, or be permanently and totally disabled at any time during the year.

Support — did not provide more than one-half of his/her own support for the year.

[VolvoGirl]

And if you qualify as a dependent you have to say you can be claimed even if they do not claim you.  Sorry.

[Hal_Al]

Taxes are complicated.  The only way to be sure which was is best is to prepare tax returns both ways (for both you and you parents) and compare.

Rough numbers say you'll get $1800 stimulus + $1500 tuition credit = $3300.  Your parents lose $500 dependent credit and $2500 tuition credit = $3000  (if eligible for EIC, they can get that for you even if not a  dependent, under a special rule).  There's some question if you qualify for the $1000 (included in the $1500) refundable portion of the credit. That requires your $18,000 income to be earned income and more than half your support. You are not eligible if you were under 18. 

As others, said it's not really optional.  

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:

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.

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

Furthermore, there is a rule that says IF somebody else CAN claim him as a dependent, he is not allowed to claim himself. If he has sufficient income (usually more than $12,400), he can & should still file taxes. In TurboTax, he indicates that somebody else can claim him as a dependent, at the personal information section.  TT will check that box on form 1040.

Even if he had less, he is allowed to file if he needs to get back income tax withholding. He cannot get back social security or Medicare tax withholding.