Drop our 23-year-old child as a dependent, full time medical student.

[ThomasDietz]

My daughter is in her first years of full-time medical school, she started in August of 2024, approx. 8 months ago.  She will be 23 in a few weeks.  With the exception of personal needs, food, clothing, gas for the car, cell phone etc.  100% of her tuition has been awarded her from the college due good grades & Academics.  She is running out of money to live on, and we cannot help her financially any more than we are.  She will need to apply for some kind of additional aid to live on.  If we continue to use her as a dependent on out taxes for 2024, will that cause he more difficulty to get a lone, privately or through a college loan program?  Is it better for her for us to drop her on our taxes as a dependent and make her 100% independent?  Please help.  Our taxes are due in 15 days.    Thank you.  

[Vanessa A]

This is not a tax question, this would be a question for the loan servicer. 

It is possible that they will base it on whether or not you CAN claim her as a dependent and not just whether or not you do.  Similar to how the IRS does  not allow students who CAN be claimed as a dependent to take the refundable portion of the American Opportunity Tax Credit.  

Prior to contacting the servicer, you can do the dependent support worksheet to determine if she is paying over half of her own support at this point and actually does qualify as a dependent. 

[Hal_Al]

Another thing to consider: If she takes out a loan, in her name only, that loan money counts as support provided by her, for the dependent support test.  If you co-sign the loan, the loan money counts as support from you, for the dependent support test. 

[ThomasDietz]

Thank you very very much for the information.

Upon reading the two replies, as much as it hurts us financially, it seems that in her best interest, we should no longer use her as a dependent...  If we had to fill out any itemized financial forms, our support would be minimal versus her Medical expenses and tuition.  I hope we are making the right decision by dropping her.  Thank you much..

[Vanessa A]

If she is 23 years old and you are married filing jointly, the primary credit you will get for her is the $500 Non-Refundable Other Dependent Credit. She does not qualify for the $2,000 Child Tax Credit.  

If you are married filing jointly (assuming based on the "our return" statement) then claiming her will not affect your filing status as Married Filing Jointly is higher than Head of household. 

You may also be losing an education credit which could be worth up to $2,500 and potentially (if you qualify) the Earned Income Credit.   Before you decide not to claim her, you may want to do your return with her on it and with her not on it. You may also want to check with the loan processor to determine IF you ACTUALLY claiming her will hurt her.  Again, it may be based off of whether you CAN not if you DO.  


(Edited 3/31/2025 @ 10:08AM PST) @ThomasDietz 

 

[Hal_Al]

Taxes are complicated.

@Vanessa A  said "You may also be losing an education credit which could be worth up to $2,500 and potentially (if you qualify) ".   

But you said earlier that "100% of her tuition has been awarded her from the college". Normally that means that you can't claim an education credit because no tuition was paid.  But there is a tax “loop hole” available to claim an education credit, for the parents of student-dependents on scholarship. The student reports all her scholarship, up to the amount needed to claim the Education Credit, as income on her return. That way, the parents  (or herself, if she 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 conditions of the grant are that it be used to pay for qualified expenses. Because she is a grad student (medical school) she is not eligible for the $2500 (American Opportunity Credit - AOC) credit, but is eligible for the (up to) $2000 credit (LLC - Lifetime Learning credit).  If she completed her undergrad degree, earlier in 2024, she would still be eligible for the AOC, for both grad & undergrad tuition. This gimmick won't work after she turns 24 (taxes are complicated) and is limited, now, if she has other income.