How to File Taxes for a College Student

[Hokiegood23]

We live in Chesapeake, Virginia.  Our daughter was in college at the University of South Carolina from January 2023 to May 2023.  She worked a part-time job in Columbia, SC while she was in school.   She came home for two months and then went to Knoxville, TN, to stay with a friend and got a full-time job from August to December 2023.  She still has a Virginia Driver's license.  How should we file her state taxes?

[KrisD15]

To clarify, 

Is the student your dependent? 

A dependent student is a resident of the state inn which the Taxpayer that claims the student lives. 

If they make money in another state at that time, they would file a non-resident or Part-Year resident state return for the state in which they earned income (depending on the resident rules of that state).

Once they move to another state (Tennessee) and if they had no plans to return, they would be a part-year resident of that new state. 

If the person is now a former student, whether you claim this person as your dependent would depend on this person's age, how many months they attended school that tax year and if they supplied more than half of their yearly support. 

When someone becomes a resident of a different (new) state, they should update their documents, such as Driver's License and Voters Registration, but NOT updating does not mean they are not a resident. 

If you still are not sure, please continue and provide more information. 

[Hal_Al]

Can the student be claimed as a dependent in the Graduation year? (answer written as if the parent asked the question)

If he/she was a student (under 24) for at least 5 months and lived with you for more than half the year, and did not provide more than 1/2 his own support for the whole year, you can still claim him. Be sure he knows you're claiming him, so he doesn't claim himself. He can only be claimed once. But, he can "file taxes" without claiming his own exemption.

The real question is who should be claiming him in this "transition" year to adulthood. You two have to agree on who is going to claim his exemption. Each should do their taxes both ways and see which way the family comes out best.  Even then, you have to meet the rules. 

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

The rule is that a child of a taxpayer can still be a “Qualifying Child” dependent, regardless of his income, if:

1. he is a full-time student under 24 for at least 5 calendar months of the year (graduating in May usually means you meet the 5 month rule)
2. he did not provide more than 1/2 his own support  (scholarships are considered 3rd party support and not support provided by the student). 
3. lived with the parent (including time away at school) for more than half the year

So, it usually hinges on "Did he provide more than 1/2 his own support in 2022.

The support value of the home you provided is the fair market rental value of the home plus utilities & other expenses divided by the number of occupants. IRS Publication 501 on page 20 has a worksheet that can be used to help with the support calculation. See: http://www.irs.gov/pub/irs-pdf/p501.pdf  (page 15)

If he has already filed one way, he can file an amended return, going the other way.

[Hal_Al]

TN does not have an income tax. If her intent is to remain in TN, she is now a TN resident. She files as a part year resident of  VA and files a non resident SC return.  Prepare the SC return first. VA will give her a credit for tax paid to SC. 

If she considers her time in TN as temporary and intends to return to VA, then she is a full year resident of VA. This means that her TN will be taxed by VA.  She files a VA resident return and a SC non resident return. Again, prepare the SC return 1st. 

 "A dependent student is a resident of the state in which the Taxpayer that claims the student lives."  So, for her time in SC, she is still considered a VA resident. But, that rule changes slightly once she is no longer a student.  As a dependent, she is still considered as living with you, if her time in TN is intended to be temporary.  Put another way, she can still be your "Qualifying Child Dependent even if she is a part year resident of TN. This is because she is considered as having lived with you for more than half the year (January to August)

[Hal_Al]

My reply above has been revised to comment on the issue of where a dependent is considered domiciled. 

[Hokiegood23]

Yes, the student is my dependent.  I claimed her on my taxes, therefore, she would file her state taxes in South Carolina as a non-resident.  Is that correct?  Does she need to file her state taxes in Virginia if she never worked in Virginia? 

[Hal_Al]

Q.   I claimed her on my taxes, therefore, she would file her state taxes in South Carolina as a non-resident.  Is that correct? 

A. Yes.

Q. Does she need to file her state taxes in Virginia if she never worked in Virginia? 

A. Yes, because she was a VA resident during the time she worked in SC (and maybe TN). She will owe little or no tax because of the credit VA gives for the SC tax paid. 

[Hokiegood23]

Thank you both for all your help.  We filed her federal and state taxes for SC and VA.  I was able to figure it out.  Again, Thank You!