Qualifying dependent - full time student

[Texas Roger]

To rebamae76: You can clima your daughter as a qualify relative dependent if she meets these tests:
1. The person cannot be your qualifying child or the qualifying child of any other taxpayer. A child is not the qualifying child of any other taxpayer if the child's parent (or any other person for whom the child is defined as a qualifying child) is not required to file an income tax return or files an income tax return only to get a refund on income tax withheld.
2. The person either (a) must be related to you or (b) must live with you all year as a member of your household.
3. The person's gross  taxable income for the year must be less than $4,050 in 2016.
4. You must provide more than half of the person's total support for the year.
5. The person must be a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico.

[mckinkade67]

Starting this year, the taxable income cutoff for students is $12,000

[macuser_22]

@mckinkade1967 - you are tagging on to a 3 year old post about 2015 tax returns.

[Carl]

The support requirement is on the student, NOT the parent. The parent is not required to provide one single penny of support. The requirement is that the STUDENT did NOT provide MORE than 50% of the STUDENT'S support. Please read all the below for a clearer picture of how this education stuff works.

• 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.

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 at least a half time student for one academic semester that begins during the tax year, (each institution has their own definition of a half 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 will claim the student as a dependent on the parent's tax return and:

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 ieven f the parent's qualify to claim the student as a dependent, and the parents do not claim them.

Now here’s some additional information that may or may not affect who files the 1098-T. If the amount of scholarships/grants exceeds the amount of qualified education expenses, 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 earned income reported on a W-2, when added to the excess scholarships/grants does NOT exceed $6200, 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 $6200, then the student should file a tax return so as to get those withheld taxes refunded.

[cjm867]

Question about how long the student lives at home should be answered 12 months because when a student it is still considered to be living at home.

[spuck20]

Carl, I see your answer cut and pasted to several questions on this topic, but some of them have a notable difference and I'm sure it confuses some people.   Here's what you wrote in 2016.  

"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 half time student) and:"

However, the answer above from 2015 says half-time all the way through.  Isn't the rule full-time for at least 5 months?   Why is half-time still in the answer at all?  Was this a recent IRS change?

Just wishful thinking on my part as our slacker kid dropped down to 11 credits without us knowing about it and so, he wasn't full time.  (21 years old)   Pretty sure that means we can't claim him, but hoping I'm wrong somewhere.

I'm guessing p970 causes confusion for people because it frequently talks about "half-time" student, but those reference the eligibility for the various credits and such, not whether a student qualifies as a parent's dependent.

[macuser_22]

@spuck20 - Per the 2017 IRS Publication 17
<a rel="nofollow" target="_blank" href="https://www.irs.gov/publications/p17">https://www.irs.gov/publications/p17</a>

This is how the IRS defines it.  What constitutes "Full Time" is how the school defines it. Every school can have it's own requirements.

Student defined.

To qualify as a student, your child must be, during some part of each of any 5 calendar months of the year:

   1) A full-time student at a school that has a regular teaching staff, course of study, and a regularly enrolled student body at the school, or

   2) A student taking a full-time, on-farm training course given by a school described in (1), or by a state, county, or local government agency.

The 5 calendar months don’t have to be consecutive.

Full-time student.
A full-time student is a student who is enrolled for the number of hours or courses the school considers to be full-time attendance.

School defined.
A school can be an elementary school, junior or senior high school, college, university, or technical, trade, or mechanical school. However, an on-the-job training course, correspondence school, or school offering courses only through the Internet doesn’t count as a school.

Vocational high school students.
Students who work on "co-op" jobs in private industry as a part of a school's regular course of classroom and practical training are considered full-time students.

[spuck20]

Macuser, Thanks.

[Carl]

Back in "the day" when my kids were in college is when conditions for some of the tax credits were worded as "more than half time", or "at least half time" while others were "full time". I'll go through that and change all that half time stuff to full time. Thanks.
Also one thing to note on the definition of a "qualified institution".
"school offering courses only through the Internet doesn’t count as a school."
Many schools do offer courses through the internet, but not only through the Internet. The way it's worded, if a school offers any one course in a classroom, but the courses you are enrolled in are all on the Internet, that is a qualified school. It says if courses are "offered" only on the Internet. There is not requirement I can find that says you absolutely have to be "enrolled" in any course that is not offered on the Internet. Kinda like that attendance thing where you only have to be enrolled, but there is no actual attendance requirement. In fact, you don't even have to pass the courses.

[macuser_22]

It is not straight forward.   Tax regulations have different definitions for different things.  The definition I posted is for a Qualifying Child dependent.   "More than half-time" is used on the 1098-T form and is a requirement of some educational credits such as the AOC.

[Rosie77]

Good morning Carl,

Am new to the community  and I haven't file my taxes because of these questions, I have 2 dependent sons in college, which both of them filed already their taxes for 2020 and they earned money with a W2 and had unearned income from the scholarships excess on box #5 on their 1098-T so that was added on their tax returns in their reported income, so here are the questions do I need to add a 8615, 8614, 8863 forms or do I still report their 1098-T even thought I wont get any credit for it?  I am so confused with these questions. Please help me.  

1. They are still my dependents
2. They already file their taxes for 2020
3. In their returns it shows that " unearned from scholarships" income was added to their lump sum of earnings for the 2020 tax year.  However I don't see any 8615 attached in their tax forms wondering if is an internal form. They used the free tax assistance VITA
4. Do I need to attached a 8615 or 8614 or 8863 or do nothing on the 1098-T?  Thank you!

[Rosie77]

Good morning Carl,

Am new to the community  and I haven't file my taxes because of these questions, I have 2 dependent sons in college, which both of them filed already their taxes for 2020 and they earned money with a W2 and had unearned income from the scholarships excess on box #5 on their 1098-T so that was added on their tax returns in their reported income, so here are the questions do I need to add a 8615, 8614, 8863 forms or do I still report their 1098-T even thought I wont get any credit for it?  I am so confused with these questions. Please help me.  

1. They are still my dependents
2. They already file their taxes for 2020
3. In their returns it shows that " unearned from scholarships" income was added to their lump sum of earnings for the 2020 tax year.  However I don't see any 8615 attached in their tax forms wondering if is an internal form. They used the free tax assistance VITA
4. Do I need to attached a 8615 or 8614 or 8863 or do nothing on the 1098-T?  Thank you!

[DanielV01]

It depends.  Since you are claiming them as dependents, any Form 8863 to claim education credits will be a part of your tax return, not theirs.  You will be able to claim education credits if any of the education expense is paid through after-tax funds:  your funds, your dependents' funds, loans, or scholarship claimed as taxable income.  For the American Opportunity Credit, for example, if up to $4000 of qualified expenses are paid for using "after tax" funds, then the maximum credit may be claimed (provided all other requirements to claim the credit are fulfilled).  (This is, in fact, one of the strategies to claiming scholarship income as taxable, to take advantage of these credits)

You will not file Form 8614.  This form is if you claim interest and dividend income on your tax return.  That will not happen, because they have earned income that requires them to file a separate tax return.  Regardless, taxable scholarship is not interest or dividend income.  It is actually reported as a type of wages (although still classified as unearned income).

However, they might need to file Form 8615.  This will depend, though on just how much scholarship they are claiming, and their overall income.  Scholarship income can trigger the form, but it falls into somewhat of a weird category because it is also considered to be wages.  So if your sons' combined income (W-2 income + scholarship) is greater than the standard deduction (which should be 12,400), then Form 8615 might be needed.  If you see that your sons are reaching these levels, feel free to comment and we can clarify further.  Otherwise, no further action will be needed.

[Rosie77]

Thank you for your response,

Actually when I looked at their tax returns they were added as part of wages W2 + scholarships all the was combined, however I don't see an 8615 attached maybe because is an internal form, that wasn't given to them on their printed copies.  But I feel if they already reported the 1098-T I don't need to do it. I won't be getting any education credits regardless because of the education expenses doesn't exceed the amount of all scholarships. In their case these were reported on their returns as wages + scholarships they were given the standard deduction too.