I am a undergraduate student (under 24) and am trying to decide whether I can be claimed as a dependent by my parents. I am a bit confused on how to calculate my total support to determine whether I provided more than half of my own support. I'll make up some numbers as an example - suppose I paid $10K of my expenses from earned income, my parents paid $8K of my expenses during the year, and a scholarship I have paid $30K of my expenses (the scholarship exceeds qualifying education expenses if that matters). Based on looking at Pub. 501 and Section 152 of the tax code, I feel like there are two possible interpretations:
1) (The common interpretation I have seen on the forums thus far) I haven't provided half of my own support. My total expenses were $48K, the scholarship paid for $30K of my expenses and I only paid for $10K, and scholarships don't count as me providing my own support - $10K / ($10K + $8K + $30K) < 1/2. I can be claimed as a dependent.
2) Section 152 of the tax code says that "amounts received as scholarships... shall not be taken into account" for the purposes of determining whether a student provided more than half of their own support and Pub. 501 also notes "a scholarship received by a child who is a student isn't taken into account..." and later on, in the qualifying relative section, notes not to count scholarships received by student children in total support. Then my total support provided, not accounting for the scholarship amount, is $18K, and I provided more than half of my own support ($10K / $18K > 1/2). I can't be claimed as a dependent.
I'm confused because it seems that the first interpretation counts scholarships received in total support which goes against what's stated in Pub. 501, while the second interpretation seems to omit a lot of expenses incurred during the year (namely, education expenses). Which interpretation is correct, or are both reasonable? Thanks!
