In the case of a student not providing more than half of their own support, that's rather easy. If the student did not make enough money during the tax year to provide more than half of their own support, that's all the "proof" that's needed. Additionally, if the student had excess financial support the student paid taxes on, then since that does not count as the student providing their own support, that does it too.
My own son had an internship where he earned $17K in his junior year. Technically speaking, he could have earned a million dollars and I would still qualify to claim him. That's because of the way the IRS looks at things.
First, scholarships & grants are applied to qualified education expenses. The only qualified expenses for scholarships and grants are tuition, books, and lab fees. that's it. If there is any excess, then it's taxable income. It automatically gets transferred as follows depending on what type of 1040 you’re riling.
1040-EZ excess scholarship income is included on line 1.
1040-A excess scholarship is included on line 7.
1040 Excess scholarhip is included on line 7.
Next, 529/Coverdell funds reported on 1099-Q are applied to qualified education expenses. The qualified expenses for 1099-Q funds are tuition, books, lab fees, AND room & board. That's it. If there are any excess 1099-Q funds they are taxable. The amount is transferred as indicated above with one exception. For the 1040 excess ESA/QTP funds get transferred to line 21 with the annotation “SCH” next to it.
Finally, out of pocket money is applied to qualified education expenses. The only qualified expenses for out of pocket money is tuition, books, and lab fees. Room & board is NOT a qualified expense for out of pocket money.
WHile my son did make $17K, he spent it on big boy toys and a few cruises over the spring and summer breaks. None of that counts as providing one's own support. I paid his rent and food and books, while his tuition was covered 100% by scholarships.
So it's actually not me that would have to prove anything, since there is no requirement for me as the parent to provide one single penny of support. The requirement would be on my son to prove that he provided more than 50% of his own support. The 17K he earned wouldn't even cover the first quarter of the tax year. So nothing to worry about.
