College Student with Financial Aid and Income- Independent or Dependent?

[CAR4143610]

I'm a 22-year-old. 2020 was my 3rd year in college and my parents have always claimed me as a dependent. My 1098 T, has information in Box 1 and Box 5. I also have a W2 with $ 4534 in Wages. Should I declare my taxes? Are there benefits to my parents including me as a dependent still?or would it be better for me to file as an independent?

[ColeenD3]

It is not a matter of whether or not it benefits them, if you qualify as a dependent, which you do, you can't be independent.

You only need to file if you have withholding to get back.

[Hal_Al]

Q. Would it be better for me to file as an independent?

A. It doesn't matter which is better.  If you qualify as a dependent, you are not allowed to file as an independent.  On the other hand, if you don't qualify as a dependent, your parents are not allowed to claim you as one.

So, the real question is: do you qualify as a dependent.  Since $4534 in wages is not enough for half your support, the answer probably comes down to what is the source of your "financial aid".  If it's scholarship, that's not self support and you are not independent.  If it's student loans, in your name only, that is self support and, depending on the amount, you probably are self supporting. If the parent co-signed the loan, that's considered parental support. 529 plan money is considered parental support. 

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, 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

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

[CAR4143610]

Thank you, your answers clear up a lot. I've understood as follows:

-since there were some withholdings in my W2, I am going to file my taxes as a dependent to get them back.

-My parents are going to claim me as a dependent since scholarships are excluded from self-support and they will input my 1098-T in their taxes, is this correct?

[CAR4143610]

Thanks I will do that.

[Hal_Al]

Yes. Since you are your parent's dependent, they claim the education credit by using the 1098-T on their tax return. 

As a dependent, you are allowed to file  to get back income tax withholding. You cannot get back social security or Medicare tax withholding. In TurboTax (TT), you indicate that somebody else can claim you as a dependent, at the personal information section.  TT will check that box on form 1040.

[CAR4143610]

Thank you so much.