As long as she is under 24 then yes, you can claim her as your dependent. You will be able to claim the tuition credit for her as well as a $500 deduction for her.
The advantage to not claiming her is all for her. As long as you are claiming her she can't get as much financial aid with college and she's not entitled to grants she might otherwise be entitled to because your income is added to hers to determine what she qualifies for. She is also paying taxes on $38,000 without being able to take a full deduction for herself.
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