Q. What am I missing?
A . Different situations for different people and taxes are complicated.
Tax year 2020 is "special" because of the potential $1800 stimulus/rebate credit. More people want their student-dependent to be independent.
Capital gains shifting is only one of many issues. The kiddie tax is based on age, student status and lack of support by earned income, not dependency. The refundable portion of the American Opportunity credit is based on age, student status and lack of support by earned income, not dependency. Taxable scholarship counts as earned income for purposes of calculating a dependent's standard deduction.
With the tax law change, effective 2018, students with earned income will get the same refund whether they claim themselves or not. The personal exemption has been eliminated and the standard deduction increased. The parents still get the $500 other dependent credit.
