Understand that all income from third parties (scholarships, gransts, 529 distributions, gifts from Aunt Mary, money from aprents, etc) do not count for the student providing their own support. There are only two possible ways the student can provide more than 50% of their own support.
- The student has a W-2 job or is self-employed and made a sufficient amount of income to justify a claim to providing more than half of their own support. Additionally, that earned income has to be more than the total amount of income received from all third party sources for the tax year.
- The student is the primary borrower on a qualified student loan, and sufficient funds were distributed to the student during the tax year to justify a claim of providing more than half of their own support. Additionally, the amount of money distributed has to be more than the total of all third party income received for the tax year.
Two things to note:
1) There is no requirement for the parents to provide the student any support. Not one single penny. The support requirement is on the student, and only the student.
2) There is no limit to how much money the student can earn (under the qualifying child rules). The student could earn a million dollars and still qualify as your dependent.
3) The key word in the rules is "QUALIFY". There is no requirement for the parents to claim the student as a dependent. However, if the parents qualify to claim the student, the student must select the option for "I can be claimed on someone else's tax return", even if the parents do not claim the student as a dependent. Basically, the parents have a choice. The student does not have a choice.
