Grad Student?

[lorwac]

My 22 year old son is a grad student and teaching assistant in Indiana.  He's paid by the university and is given tuition remission.  We live in NY.  His license is NY and when not in school, he lives with us.  We pay rent for his off-campus apartment along with all his living expenses (agreed that his salary gets saved for his future).  His W-2 shows his IN address and taxes withheld are IN.  Questions:  1.  Can we claim him as a dependent and 2.  Does he file a NY return and an IN return?

[Hal_Al]

Q. Can we claim him as a dependent?

A. Yes.

Q. Does he file a NY return and an IN return?

A. Yes, both. 

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.

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 himself.

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 general rule is: your (the student) report all your income on your home state return, even the income earned out of state. You file a non-resident state return for the state you worked in and pay tax to that state. Your home state will give you a credit, or partial credit, for what you paid the non-resident state. You will have to file a non resident IN state return and pay IN tax on the income earned there.. You will also file a NY full year resident return and calculate tax on ALL your income. NY will give you a credit, or partial credit, for the tax you pay IN. So, there will be little or no double taxation, but you have the cost and hassle of filing two state returns. Do the nonresident state return first.

[Vanessa A]

1.  Can we claim him as a dependent  Yes, you can claim him as a dependent since he is under 24 and he is not providing more than half of his own support.  Since he is coming home during breaks, he is considered to be gone temporarily which still counts as living at home. 

 2.  Does he file a NY return and an IN return? Yes, he will need to file an Indian Non-Resident Return and a NY resident return. 

In general, your home state will tax all in come from all sources.  What you will do is you will file a nonresident return for the states that you do not reside in, but you visit for work and earn money in.  When you file, you will fille out your nonresident states first.  Then you will fill out your resident state, claiming a credit for taxes paid to the nonresident states on your home state return.  You may or may not still end up owing money to your resident state depending on whether or not their tax rate is higher or lower than your nonresident state.  If the non resident state had a higher tax rate than your resident state, your credit will be limited to the amount of tax you would have paid to your resident state.  They will not give you a refund of the taxes you paid to the nonresident state. 

Multiple States

File Non Resident State Return