I am a full-time college student under the age of 24. I am not sure if I can claim myself on my taxes.

[drr1904]

Info about ME: 

- I am a 20 year old full-time college student. 

- I receive a full tuition scholarship, a Pell Grant, and another institutional scholarship. A rough estimate of my yearly refund is a little over $8000 (this is my refund AFTER tuition is accounted for). 

- I also have two part-time jobs. The money earned from my jobs is more or less equivalent to the amount of my refund. My earned income ranges from around 6000-9000 per year, depending on my hours at work, etc. 

- Considering my day-to-day expenses, my part-time jobs cover around 75% of them. However, my financial aid provides a considerable safety net -- I always have over a thousand in my savings account as a result of my financial aid reimbursement. 

Info about my PARENTS: 

- My parents are divorced and have been since I was 5. 

- My mother was my custodial parent. She has always claimed me on her taxes, and I lived with her solely from ages 5-18. 

- My mother files her information for my FAFSA. 

- HOWEVER, my mother does NOT provide ANY of my financial support, and has not since I graduated and moved out 2 years ago. 

- My father pays for nearly half of my living expenses. This includes my phone bill, car payment, and car insurance specifically, and occasionally a cash gift. 

- I pay for my rent, utilities, gas, clothing, food, recreational expenses, out-of-pocket healthcare expenses, etc. So basically, everything except for what my dad pays. This is usually more than what my dad provides, though it does depend on the month and how much I spend. 

- My dad has NEVER claimed me as a dependent on his taxes. Their divorce agreement specified that my mom would be the one to claim me on her taxes. 

QUESTIONS: 

- If I provide more than half of my own support, can I claim myself on my taxes in 2020, OR do I still count as a "qualifying child" based on the criteria above? 

- If a large amount of my support comes from my financial aid (based on the ratio of financial aid to earned income, I estimate financial aid pays for around half of my day-to-day expenses), can I claim myself? 

- If I CAN claim myself, do I need to include my financial aid refund as taxable income? If so, what is the consequence for not doing so? Is there a chance I would receive a tax refund on this after paying the tax amount? 

- If I do NOT count as a qualifying child and I DO claim myself, what happens if my mom still claims me, and I also claim myself? 

NOTE: 

I am NOT asking this for FAFSA related purposes. My mom has completed my last FAFSA form before I graduate. 

EDIT: 

I understand that I will not get a larger tax refund if I claim myself. I'm asking because if I claim myself, then I may qualify for a health insurance subsidy, which I need desperately because I do not have health insurance and cannot afford private plans. Please do not assume which is best for me without knowing my current situation, thanks. 

[Critter]

Short answer is you ARE still a dependent that a parent can continue to claim ... and at your income level claiming yourself would not get you anything more ... so you are worth more to the parent than yourself. 

And any scholarship amounts that pay for living expenses is taxable income on your return ... follow the TT interview screens to determine that amount.  

[drr1904]

Hi, 

Can you please be specific in what makes me a dependent still, if I pay for slightly more than half of my own living expenses? 

Also, I'm asking for health insurance related purposes. I'm not asking about personal exemptions/standardized deductions. 

[Hal_Al]

What makes you still a dependent is that you don't provide more than half your own support. Scholarships (Pell Grants and other institutional scholarship) are considered third party support and not support provided by you (even any taxable portion). 

But there is one other issue that is not clear. What does "moved out 2 years ago" really mean?  If you are only away at college, even if living off campus, that is considered a temporary absence, from you mother's home. For the qualifying child rules**, you are still considered as living with her.  If you have actually "moved out", then you can claim yourself, because then you are no longer a Qualifying child and neither of your parents can't claim you as a standard dependent (qualifying relative) because neither provided more than half your support. Note that the support rule is different for qualifying child (you must not provide half your support) and qualifying relative (the taxpayer [parent] must have provide more than half your support).

But claiming yourself (filing independent) will do you no good. With the tax law change, effective 2018, most students will get the same refund whether they claim themselves or not. The personal exemption has been eliminated and the standard deduction increased.  Dependents get the full $12,000 standard deduction if their income is earned income and/or taxable scholarship.

Furthermore, a student, under age 24, is only eligible for the refundable portion of the American Opportunity Credit (up to $1000) if more than half his support comes from earned income (you clearly do not). You cannot be supporting yourself mainly on parental support,  student loans & grants.

________________________________________________________________________

**QUALIFYING CHILD RULES. 

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 considered third party support and not as support provided by the student.
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 him self.

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.

Furthermore, there is a rule that says IF somebody else CAN claim him as a dependent, he is not allowed to claim himself. If he has sufficient income (usually more than $12.000), he can & should still file taxes. In TurboTax, he indicates that somebody else can claim him as a dependent, at the personal information section.  TT will check that box on form 1040.

[Hal_Al]

Q. If I CAN claim myself, do I need to include my financial aid refund as taxable income? 

A. Yes. The portion of you scholarships/Pell grant that exceed you qualified expenses (tuition, fees and course materials) is taxable income. In your case, probably the whole $8000 "refund".

Q.  If I do NOT count as a qualifying child and I DO claim myself, what happens if my mom still claims me, and I also claim myself? 

A. The IRS comes after both of you and you each have to justify your claim.

As Critter already said, it's best if you Mom claims you.  You will not pay less tax (or get a bigger refund) by claiming yourself. Your mom will get the $500 other dependent credit and up to $2500 Tuition credit.**

__________________________________________________________________________

**There is a tax “loophole” available. The student reports all his scholarship, up to the amount needed to claim the American opportunity credit, as income on his return. That way, the parent  can claim the tuition credit on her return. She can do this because that much tuition was no longer paid by "tax free" scholarship.  She cannot do this if the school’s billing statement specifically shows the scholarships being applied to tuition or if the conditions of the grant are that it be used to pay for qualified expenses.

Using an example: Student has $15,000 in box 5 of the 1098-T and $7000 in box 1. At first glance he/she has $8000 of taxable income and nobody can claim the American opportunity credit. But if she reports $12,000 as income on her return, the parents can claim $4000 of qualified expenses on their return (for the maximum $2500 credit)

[drr1904]

Thank you for this response. 

"Moved out" means just that - I moved out of my mom's house when I began college, and I have been living on my own permanently since then in various off-campus settings. I do not live with either parent for any part of the year. Aside from what my dad pays for (car payment, car insurance, and phone bill) I pay for all of my day-to-day living expenses. My mom covers none of that. 

Also, whether or not I provide "half of my support" seems really ambiguous. The cost of car payment, car insurance, and phone bill, which my dad provides, comprises around half of my monthly living expenses alone. I personally pay for everything else. You stated that scholarships count as external support, but I could likely survive my current lifestyle with my earned income alone -- the scholarships mostly exist as a safety net by giving me a considerable amount of savings. 

At the end of the day, what really happens if I claim myself and both of my parents agree not to claim me? I understand claiming myself won't benefit me tax-wise and I won't get a larger tax refund, but me being lower-income grants me access to certain medical services (i.e., Medicaid), which I need because I have never been able to afford insurance. I don't care if my mom gets a tuition credit or not. It's not like I'll be seeing that money, anyway. 

Also, thanks for the info on the American Opportunity Credit! I'll have to do more research on that. Never heard of it! 

[Hal_Al]

If you have "moved out", the support issue is moot. The fact that you did not live with a parent for more than half the year, means that you cannot be a qualifying Child dependent of someone else.  Since you have more than $4200 of reportable income, you cannot be the qualifying relative (standard) dependent of someone else**.

So, the new answer: you can file independent (claim yourself). Nobody else is allowed to claim you.  

The support issue is moot for the dependency issue. But, it's still on the table for the American Opportunity Credit.  A student, under age 24, is only eligible if he supports himself by working . He/she does not qualify for the (up to) $1,000 refundable portion of the American Opportunity Credit (AOC) if items 1, 2, and 3 below apply to him. 
1. He was:
.....a. Under age 18 at the end of 2019, or 
......b. Age 18 at the end of 2019 and his earned income was less than one-half of his support, or 
......c. A full-time student over age 18 and under age 24 at the end of 2019 and his earned income was less than one-half of his support .
2. At least one of his parents was alive at the end of 2019.
3. He is not filing a joint return with his spouse for 2019.

You have to do the math to see if you qualify.  I don't think you do, even if you are putting the excess scholarship into savings. Remember, the support your father provides counts against you for this test. 

 The IRS has a worksheet that  is designed for seeing if a taxpayer can be claimed as a dependent.  It may help with the support calculation for (AOC).  If you do use it, enter only your earned income on line 1. http://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf

________________________________________________________________________

If you have about $8000 of earned income and report about $12,000 of taxable scholarship (allowing you to claim $4000 of expenses for the AOC), you will have a tax liability of about $800.  That will be wiped out by the nonrefundable portion of the AOC and you will receive a $1000 "refund" based on the refundable portion.  Even if the refundable portion is not allowed, the $800 tax liability will be eliminated.

**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, a relationship test and residence test. Only a QC qualifies a taxpayer for the Earned Income Credit and the Child Tax Credit. They are interrelated but the rules are different for each. As stated above, the support test is different for both types.

.

[Carl]

Just a few things to point out before I provide you "the whole shebang" straight from IRS Publication 970.

my mother does NOT provide ANY of my financial support,

Doesn't matter. Per IRS Publication 970 there is absolutely no requirement for your parent(s) to provide you any support. Not one single penny. The support requirement is on the student and *ONLY* the student. It reads as follows:

If the student did not provide more than 50% of the students own support then the parent(s) qualify to claim the student as a dependent on the parent's tax return. Scholarships, grants, 529 funds, gifts from Aunt Mary, etc. *do* *not* *count* for the student providing their own support.

Several things to clarify about the above statement. First, the key word in the above is *qualify*. There's nothing that states your parent(s) must claim you. But if they *qualify* to claim you you flat out *must* select the option to indicate "I can be claimed on someone else's return." It does not matter if they claim you or not. Period.

Second, there are only two possible ways a student can provide more than half of their own support.

     1) The student as a W-2 job or is self-employed and earned a sufficient amount of money during the tax year to justify a claim to having provided more than half of their own support.

     2) The student is the *PRIMARY* borrower on a *qualified* student loan and sufficient funds were distributed to the student during the tax year to justify a claim to having provided more than half of their own support.

Third, it is still possible for the student to have earned a million dollars in the tax year, yet the parents still qualify to claim the student on the parent's tax return. As an exaggerated example, lets say the student recevied $60K in scholarships and grants during the tax year, and took a $40K distribution from a 529 plan in the same tax year. That's $100,000.00 of "third party" income received by the student. So that means the student would have had to earn "at least" $100,001.00 to claim they provided more than half of their own support. But wait, that won't fly with the IRS. There is absolutely no way on this green earth that the IRS will ever buy into a student *needing* more than $200,000 as an undergraduate for one tax year. Even including the qualified education expenses won't come anywhere close to that. So this is a case where even if you earn a million dollars, you're begging for an audit if you try to say you provided more than half of your own support.

except for what my dad pays.

Any money given to you or spent on your behalf by "either" parent is third party support. Basically, if you didn't go out and "do something" to earn it, then it's third party support. Period.

can I claim myself?

Don't even try - unless you want to risk an audit on this about 24-36 months down the road after you file. Will you really need that headache at that point in your life?

Now here's the "whole shebang" as promised.

College Education Expenses

Colleges work in academic years, while the IRS works in calendar years. So the reality is, it takes you 5 calendar years to get that 4 year degree. With that said:

 - Scholarships and grants are claimed/reported as taxable income (initially) in the year they are received. It does not matter what year that scholarship or grant is *for*

- Tuition and other qualified education expenses are reported/claimed in the tax year they are paid. It does not matter what year they pay *for*.

Understand that figuring out who claims the student as a dependent, and determining who claims the education expenses & credits, is two different determinations. It depends on the specific situation as outlined below. After you read it, I have also attached a chart at the bottom. You can click on the chart to enlarge it so you can read it. If it’s still to hard to read on your screen then right-click on the enlarged image and elect to save it to your computer. Then you can double-click the saved image file on your computer to open it, and it will be even easier to read.

Here’s the general rules gisted from IRS Publication 970 at http://www.irs.gov/pub/irs-pdf/p970.pdf Some words are in bold, italicized, or capitalized just for emphasis. This is because correct interpretation by the reader is everything. Take the below contents LITERALLY, and do not try to “read between the lines”. If you do, you’ll interpret it incorrectly and risk reporting things wrong on your taxes. For example, there is a vast difference between “can be claimed” and “must be claimed”.  The first one indicates a choice. The second one provides no choice.

Now there are two separate determinations to be made here.

• Who claims the student as a dependent.
• Who reports all the education expenses and claims all the education credits.

First, who claims the student as a dependent?

If the student:

Is under the age of 24 on Dec 31 of the tax year and:

Is enrolled in an undergraduate program at an accredited institution and:

Is enrolled as a full time student for one academic semester that begins during the tax year, (each institution has their own definition of a full time student) and:

the STUDENT did NOT provide more that 50% of the STUDENT’S support (schollarships/grants received by the student ***do not count*** as the student providing their own support)

Then:

The parents qualify to claim the student as a dependent on the parent's tax return . Period, End of Story. But one thing I want to point out here. The parents *QUALIFY* to claim the student. The parents are *NOT* required to claim the student as a dependent. But even if they don’t, since they *qualify* to claim the student, then if the student will be filing their own tax return the student is *REQUIRED* to select the option for “I can be claimed on someone else’s return”.  To reiterate:

If the student qualifies to be claimed on the parent’s tax return, then the student can not take the self-exemption on their own tax return, no …matter…what.

Who reports all the education expenses and claims all the credits?

If (and only if) the parents qualify to claim the student as a dependent, *and* the parents actually are claiming the student as a dependent, then:

The parents will claim all schollarships, grants, tuition payments, and the student's 1098-T on the parent's tax return and:

The parents will claim all educational tax credits that qualify.

If the student will be filing a tax return and:

The parents qualify to claim the student as a dependent, then:

The student must select the option for "I can be claimed on someone else's return", on the student's tax return. The student must select this option even f the parent's qualify to claim the student as a dependent, and the parents do not claim them.

Here’s when the parents will claim the student as a dependent, but the parents will NOT claim any of the education expenses or report the 1098-T on the parent’s tax return.

.If the amount of scholarships/grants/529 funds exceeds the amount of qualified education expenses,  then the student will report the education stuff on the student’s tax return. The parent will know this when reporting the education on their tax return, because the parent will not qualify for any of the tax credits. (They only qualify for tax credits based on out-of-pocket qualified expenses not covered by scholarships/grants.)  Also, the parent’s will not qualify for the credits depending on their MAGI which is different for each credit, and depends on the marital status of the parent or parents.

In the case where scholarships/grants covers “all” qualified education expenses, the parent’s don’t need to report educational information on their dependent student at all – but they still claim the student as a dependent if they “qualify” to claim the student.

 If the scholarships/grants exceed the qualified education expenses, then the student will report the 1098-T and all other educational expenses and scholarships/grants on the student’s tax return. The student will pay taxes on the amount of scholarships/grants that are not used for qualified education expenses. However, if the student’s investment income exceeds $1,050 or if the student’s earned income when added to the excess scholarships/grants does NOT exceed $12,350 for the 2019 tax year, then the student doesn’t even need to file a tax return, and nothing has to be reported.

If the student has any other taxable income not reported on a W-2, and it exceeds $400, (not including taxable portion of scholarships/grants) then most likely it’s considered self-employment income. That will require a tax return to be filed and the student will have to pay the Self-Employment tax on that income.

Finally, regardless of the student’s W-2 earnings, if any taxes were withheld on those earnings and it was less than $12,350, then the student should file a tax return so as to get those withheld taxes refunded.

1099-Q Funds

 First, scholarships & grants are applied to qualified education expenses. The only qualified expenses for scholarships and grants are tuition, books, and lab fees. that's it. If there is any excess, then it's taxable income. It automatically gets transferred to and included in the total on line 7 of the 1040.

Next, 529/Coverdell funds reported on 1099-Q are applied to qualified education expenses. The qualified expenses for 1099-Q funds are tuition, books, lab fees, AND room & board. That's it. If there are any excess 1099-Q funds they are taxable. The amount is included in the total on line 7..

Finally, out of pocket money is applied to qualified education expenses. However, take ***SPECIAL*** ***NOTICE*** that the tuition and fees deduction expired at the end of the 2017 tax year and was not renewed for the 2018 tax year. It’s unknown if it will be renewed in the future. If it is renewed for the 2019 tax year, the only qualified expenses for out of pocket money is tuition, books, and lab fees. Room & board is NOT a qualified expense for out of pocket money. As of this writing, (3/26/2019) congress has not renewed the out of pocket expense deduction, which expired in 2017.

When you have a 1099-Q it is extremely important that you work through the education section of the program in the order it is designed and intended to be used. If you do not, then there is a high probability that you will not be asked for room & board expenses, and you could therefore be TAXED on your 1099-Q funds.

Finally, if "all" qualified expenses are covered by scholarships, grants, 1099-Q funds and there is ANY of those funds left over, the left over excess is taxable. While the parent can still claim the student as a dependent, it is the student who will report all the education stuff on the student's tax return. That's because the STUDENT pays the taxes on any excess scholarships, grants and 1099-Q funds.