Example 5—child emancipated in May.
When your son turned age 18 in May 2020, he became emancipated under the law of the state where he lives. As a result, he isn't considered in the custody of his parents for more than half of the year. The special rule for children of divorced or separated parents doesn't apply.
The same information is contained on page 10 of publication 504 which covers divorced and separated individuals.
https://www.irs.gov/pub/irs-dft/p504--dft.pdf
Now, my confusion comes from the question, If the special rules for divorced parents don't apply when the child turns 18, doesn't this mean that the normal rules apply instead? Everything in my logical mind says the normal rules still apply (which is also what @CatinaT1 indicated). However, publication 501 and example 5 are pretty clear that the normal rules don't apply for emancipated children of divorced or separated parents. And there is also nothing that says that the emancipation rule only applies in the year in which the emancipation occurs, and the normal rules apply in the following year.
Taking that statement at its word, neither parent can claim the child as a "qualifying child" dependent because the child does not live with either parent. However, they could be a "qualifying relative" dependent of either parent who provides more than 50% of their total support, because residency is not required for a qualifying relative dependent who is a biological child. (Total support includes tuition and college expenses but also room and board where they live. Just because the father pays 2/3 tuition doesn't necessarily mean he pays more than half their total support.). If they have their own taxable income more than $4300, they are disqualified from being a qualifying relative dependent no matter how much support they receive from either parent.
Assuming they have taxable income more than $4300, no one can claim them as a dependent and they answer "no" to the question, "Can another taxpayer claim you as a dependent?"
The effect of this is is that have to claim the AOTC, not you, and unless they have substantial income from working, they probably won't actually get any money from the AOTC. However, for 2020, it also means they will qualify for a recovery rebate on their tax returns. And it may give them better financial aid packages in the future.
@Hal_Al what do you think?
