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:
- 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
- He did not provide more than 1/2 his own support. Scholarships are excluded from the support calculation
- He lived with the parent (including temporary absences such as away at school) for more than half the year
Although Penn Foster is not a "qualified institution" for tuition credits, it is still a school for the Full time student dependent rule, even if all the course work is online. So, it comes down to how many credits you are taking. The school determines what is a full time load. Most colleges require students to register for at least 12 credit hours to be considered full-time (it varies) you may need to check with your school registrar’s office to be certain.
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
If you do not qualify as a QC; then the income rule ($4300) applies to whether you can be claimed as a Qualifying Relative. You can't.
