There are two completely separate and unrelated determinations that must be made first and foremost.
First, who qualifies (if anyone) to claim the student as a dependent on their tax return? At this point, this has nothing what-so-ever to do with who claims the education stuff.
If on Dec 31 of the tax year the student was:
- Under the age of 24 and;
- Enrolled as a full time student for *ANY* *ONE* *SEMESTER* that started in the tax year (this would include their last semester in high school) and;
- Was enrolled in a course of study that will lead to a degree or credentialed certification (a high school diploma is a credentialed certification) and;
- Was enrolled in an accredited institution and;
- Did not provide more than half of their own support (all third party income such as scholarships and grants *do* *not* *count* for the student providing their own support) then:
The parents qualify to claim the student as a dependent on the parent's tax return. So if the student is required to file a tax return then the student must select the option for "I can be claimed on someone else's tax return." Period. End of Story.
Now understand this - the key word here is *QUALIFY*. So if the student qualifies to be claimed as a dependent on someone else's tax return (usually the parents') then it *DOES* *NOT* *MATTER* if the parents actually claim the student as a dependent or not. The student is still required to select the option for "I can be claimed on someone else's tax return".
Now some things I want to point out about the above five requirements for the student to qualify as a dependent.
- There is NO REQUIREMENT for the parents to provide the student any support. Not one single penny. The support requirement is on the student, and *only* the student.
- There is NO LIMIT on the student's income. The student could earn a million dollars (literally!) and still qualify to be claimed as a dependent on someone else's tax return.
- There are only two possible ways that the student can provide more than half of their own support.
1) If the student was self-employed or had a W-2 job in the tax year, and earned enough money to justify a claim to having provided more than half of their own support for the *ENTIRE* tax year (every single day), and that student's earned income does not exceed the total of "ALL" third party income (scholarships, grants, 529 distributions, gifts from Aunt Mary, money from mom and dad, etc.)
2) The student is the *PRIMARY* borrower on a *qualified* student loan, and sufficient funds were distributed to the student in the tax year, and the total distributed funds *do* *not* *exceed* the total of all third party support received (identified above).
Finally, take note that when a student is claiming to have provided more than half of their own support and have the earned income or borrowed money to support their claim, their cost must be reasonable. For example, an undergraduate can not justify a $5000 a month penthouse suite as a necessity for them to attend college. Likewise, steak and eggs for breakfast with steak and lobster for dinner and lunch every day isn't going to cut it either. A $40,000 Tesla for transportation will definitely raise flags with the IRS too.
So the first two questions you have to answer are these:
1) Do you qualify to claim the student as a dependent on you tax return?
2) If yes to the above, then are you actually going to claim that student as a dependent on your return?
