How does student with no income claim CO TABOR credit

[SD58]

My child goes to school in another state, but is not working so did not receive W2.  Can child still apply for the CO TABOR refund?

[Vanessa A]

When you say your child, how hold are they?  In order to claim the CO TABOR credit, you need to be at least 18 years old and a CO resident.  If they return to your home when they are not in school, they would be considered temporarily absent from the state but still be considered a resident of the state. 

You do not have to have income, but you do need to file a CO return, even if you do not have income in order to claim the credit.  Since your child does not have income to file a federal return, you may end up needing to print and mail their return as $0 returns are sometimes rejected electronically. 

To claim, the credit, just walk through the normal steps in TurboTax to file a return, you will enter their personal information but no income.  Then keep going to the state section to claim the credit.  If the returns come back as rejected, simply correct it by selecting print and mail.  Then follow the instructions that will print with the return to mail the forms. 

[SD58]

They are 21, in their last year of undergrad school but still considered a ‘resident’ of CO as they do come home when not in school.

So, in order to file state taxes, they will need to file federal also?  
Will the 1098 transfer as ‘income’ because the scholarships and grants are more than what was paid for ‘qualifying tuition and expenses’?

[Vanessa A]

Yes, you cannot e-file a state return without a federal return. 

If they have a 1098T with income Scholarships greater than the tuition, then yes, this would be considered income and need to be entered on the return.  This could also be subject to the kiddie tax, if it is more than $2,500, since this is unearned income, so depending on how much more the grants and scholarships were than the tuition and expenses, they may or may not have a $0 return.

Are you claiming them as a dependent and claiming the education credits?  If so, you will both enter the 1098-T on your returns.  You for the credit, them for the taxable income.  You can claim enough of the tuition and fees to claim the credit and then they will claim the rest of the tuition and fees to decrease the amount of taxable income.  See the answer by Champ Hal Al for a detailed explanation on how to maximize your credit and minimize their scholarship income. 

[SD58]

I appreciate your help.  Thank you