Federal Student Loans as Support

[Janice59]

I’m trying to determine if my 24 year old son who is a graduate student is my dependent. His only means of support beyond what I pay for is federal student loans in his name.

The response in TurboTax to ‘Did you support yourself in 2019?’ is "Consider all your living expenses and what you contributed. If you paid for more than half with your earned income, you supported yourself.  If you used unearned income or student loans to pay for most of your expenses, you did not support yourself."    

However, Publication 501 - Worksheet 2, which determines support says: Enter the total funds belonging to the person you supported, including income received (taxable and nontaxable) and amounts borrowed during the year, plus the amount in savings and other accounts at the beginning of the year.

 Based on the Worksheet, it appears as though the student loans do count toward support, and I cannot say that I provided more than half his support...

[DawnC]

It does not sound like you can claim him, but you are reading about 2 different requirements.  If your son was 24 on Dec 31, his status as a student does not matter.  You can only claim him as a qualifying relative and not as a qualifying child, see Who can I claim as my dependent?   Here are the requirements for you to claim him if he was already 24 at year-end:

• They're a U.S. citizen, resident alien, national, or a Canadian or Mexican resident.
• They aren’t filing a joint return with their spouse.
• They lived with you the entire year.
• They made less than $4,200 in 2019.
• You provided more than half of their financial support.  

The other article you are referencing How do I answer the "Did you support yourself in 2019?" question? Did I support myself?  is talking about your son being able to claim the American Opportunity Tax Credit which he can only do if he claims himself.  If you can claim him as a dependent, you can take the credit.   If you can't claim him, then he can claim himself and the AOTC on his own return.

If you want to double-check your ability to claim him, you can use the IRS's Interactive Tax Assistant (ITA) found here.  It takes about 15 minutes to complete. 

An ITA for claiming education credits can be found here.   

[Hal_Al]

Student loans, in his own name (you did not co-sign) are considered support provided by him. So, you are correct; student loans do count toward support, and you cannot say that you provided more than half his support.  You cannot claim him as a dependent. 

Did your son turn 24 in 2020?  The earned income support  rule  applies to students under 24.  It has to do with non working students under 24 claiming a refundable tuition credit. Earned income is not relevant to the dependent issue. 

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. Only a QC qualifies a taxpayer for the Earned Income Credit.

If your son was over 23 on 12-31-19, he cannot be a QC.  The support test for a standard dependent is that you (the parent) provided more than half his support for the whole year.. The support test for a QC is whether he provided more than half his own support. That distinction may not make any difference in your case.  But, scholarships (as opposed to loans) are third party support and not support provided by the student.  Parents can frequently claim a 23 year old but not a 24 y.o.

Full rules: 

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