My parents can put my as a dependent but they are not marking me as a dependent. I got 4500 from my fasfa refund and used it on something other than educational expenses. So that would fall under unearned. Would that fall under kiddle still or will I still have to pay as a dependent?
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It depends, but based on the information you provided, the unearned income may be subject to kiddie tax.
If were a full-time student, and had earned income that was less than half the cost of your support, you will need to file form 8615. If your parents could claim you and chose not to, this doesn't change the support test.
Keep in mind, you can include other fees in the cost of education such as textbooks, a laptop, etc.
A full-time student is defined as a student that is full-time for 5 months or more. If you did not meet that definition, and you were a part-time student, or discontinued your studies and weren't a student at all, you aren't subject to kiddie tax.
Here is some more information you might find helpful: What is the Kiddie Tax?
So I would have to wait for my parents to file before I can even file? Since it doesn’t matter if they claim me I would still have to pay kiddie tax because my fasfa was 4500 and my regular income was 1500 correct?
$4500 of taxable scholarship (fasfa refund) does not change your dependent status.
Q. So that would fall under unearned?
A. No. Scholarships are a hybrid between earned and unearned income. It is earned income for purposes of the $14,600 filing requirement (2024) and the dependent standard deduction calculation (earned income + $450 . It is not earned income for the kiddie tax and other purposes (e.g. EIC). For grad students and post grad fellows, scholarship, stipend and fellowship income is earned income ("compensation") for IRA contributions.
Q. Would that fall under kiddie still?
A. It would not "fall under" kiddie tax until your total income reached $14,600.
Q. Or will I still have to pay as a dependent?
A. If you can be claimed as a dependent, you will be taxed as a dependent, whether somebody actually claims you or not. Nothing you described provides a reason for your parents not to claim you as a dependent. If that $4500 is your only income, you are not even required to file a tax return.
Q. So I would have to wait for my parents to file before I can even file?
A. Yes, if you were subject to the kiddie tax. But you are not subject to it.
Q. Since it doesn’t matter if they claim me I would still have to pay kiddie tax because my fasfa was 4500 and my regular income was 1500 correct?
A. No. $4500 + 1500 = $6000 is still less than the $14,600 filing threshold (even if the $1500 was unearned income). You do not pay kiddie tax. You do not need to file, unless tere was federal withholding from that $255 of "regular income".
$6000 is more than $5050 which could change your dependent status. But only if you are over age 23 or not a fulltime student.
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:
So, it doesn't matter how much income you have.
If you are getting a refund from FAFSA, you might think your parents can't claim a tuition credit.
There is a tax “loop hole” available to claim an education credit, for the parents of students on scholarship. The student reports all his scholarship, up to the amount needed to claim the American Opportunity Credit (AOC), as income on his return. That way, the parents (or himself, if he is not a dependent) can claim the tuition credit on their return. They can do this because that much tuition was no longer paid by "tax free" scholarship. You 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 $10,000 in box 5 of the 1098-T and $8000 in box 1. At first glance he/she has $2000 of taxable income and nobody can claim the American opportunity credit. But if she reports $6000 as income on her return, the parents can claim $4000 of qualified expenses on their return.
Books and computers are also qualifying expenses for the AOC. So, extending the example, the student had another $1000 in expenses for those course materials, paid out of pocket, she would only need to report $5000 of taxable scholarship income, instead of $6000.
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