I'm a cosigner on my kids student loan

Since you are responsible for the loan as a co-signer and if the loan was obtained while the student was your dependent, you can still deduct the student loan interest even if the student is no longer your dependent. 

If she qualifies as your dependent, she can't claim herself.

 

There is a common idea that a parent can decide not to claim a dependent so that they can reap certain benefits. The truth is, a qualifying child or a qualifying relative is your dependent.

 

While the IRS never comes out and says that you must claim a dependent, they do give the definition of who is a dependent.

 

The term “dependent” means:

• A qualifying child, or
• A qualifying relative.

 

While you can choose not to claim your dependent, the qualifying person MUST indicate on his own return that he is a dependent, but that no one will actually claim him as such.

 

In TurboTax Online, the questions read:

 

Someone else can claim me as a dependent on their tax return. You would answer yes.

 

And this person will claim me on their 2021 tax return. You would answer no.

Being 21 is not a reason for her to not be a dependent.

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 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.

The IRS has a worksheet that can be used to help with the support calculation. See: http://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf

 

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 $12,550), 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.

Even if he had less, he is allowed to file if he needs to get back income tax withholding. He cannot get back social security or Medicare tax withholding.

See full dependent rules at: https://turbotax.intuit.com/tax-tools/tax-tips/Family/Rules-for-Claiming-a-Dependent-on-Your-Tax-Return/INF12139.html