@btw_tax wrote:
Is support just costs related to college? Half of her support was from scholarships and almost other half was from 529 distribution. Maybe $2k was paid out of pocket.
There are two things going on here. In your child's personal interview, there are two questions,
- "Can someone else claim you? and
- "Will that other taxpayer actually claim you this year?"
If your daughter can be claimed as a dependent, she must check that box, even if you don't want to claim her. Failing to check that box would result in certain tax benefits including this year, the stimulus credit, and would be tax fraud.
However, if she answers that she can be claimed but won't be claimed, that will allow her to claim a partial American Opportunity Credit. This is usually used when the parents' income it too high to claim the AOTC, and the child must have more than $12,400 income from working to get even a partial benefit, but it may be better than nothing. In this case, you would enter the 1098-T on the student's return, not the parents' return.
Now to the question of whether she can be claimed:
A college student can be claimed as a dependent by their parent if they are
- A full time student under age 24
- Live with their parents more than half the year
- Don't provide more than half their own support
For the "live with their parents" question, a child is deemed to live with their parents during temporary absences, and college is usually considered a temporary absence. If your child comes home over the summer, and still uses your home as an address and has their extra "stuff" there, they probably count as living at home. (Some college students do actually move out permanently. If this is the case, you will need to save proof in case the IRS audits your dependent situation.)
For the support question, the child's need or cost includes room and board, tuition, clothing, travel, entertainment and medical expenses. Support the child provides themself includes earnings from a job or investments and student loans taken out in their own name. For support provided by the parents, you include any direct costs you pay, student loans you take out in your name (parent loans), the value of medical insurance if they are on your plan, and the value of room and board at your home where the child lives. (Essentially, an equal share of rent, food, utilities, and other household expenses. If your household is you, your spouse and your child, then 1/3 is assigned to your child. If 4 people live in the home, 1/4, and so on.). Scholarships and grants don't count on either side of the equation.
Add up your child's total costs, what you provide, and what the child provides, to see if the child provides "more than half" their own support.
