Old thread I know.
For the 2022 tax season, I was 19 years old, and my parent did not claim me as a dependant because there was no write-off for them.
That is not relevant, as the parents have a choice, but the student does not.
For the 2023 tax season, however, I will be starting college in the next week, and since they provide more than 50% of care.
Read IRS Publication 970 at https://www.irs.gov/pub/irs-pdf/p970.pdf. 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. Basically, that requirement is:
If the STUDENT did NOT provide more than 50% of their own support for the entire tax year, then the parents *qualify* to claim the student as a dependent on the parent's tax return.
My question is that I own my own SMLLC; this year, I will most likely not make more than $10,000 max, and after write-offs and expenses, it will probably be no more than $3000 net income. I am having a difficult time seeing how much money I can make while still being claimed as a dependent and going to college.
There is no income threshold for a student that meets all the other requirements. The student can earn a million dollars (lterally!) and still qualify as a dependent on the parent's tax return.
Will I be safe running my business and making money while still being able to be claimed, allowing them to deduct me from their taxes and receive the AOTC credit?
In a nutshell, yes.
Let me try to clarify this support thing.
There are only two possible ways the student can justify any claim to providing more than half of their own support.
1.) The student has a W-2 job or is self-employed and earns a sufficient income to justify a claim to providing more than half of their support. Additionally, whatever is earned must be more than the total of all third party income received for the entire tax year. Third party income includes, but is not limited to, scholarships, grants, 529 distributions, gifts from Aunt Mary, money from parents, money you find on the street, etc. etc. etc.
2.) The student is the *primary* borrower on a *qualified* student loan and sufficient monies are distributed from that loan during the tax year to justify the student's claim to providing more tha half of their own support. Additionally, the total paid out during the tax year must be more than the total of all third party income received for the entire tax year. Third party income includes, but is not limited to, scholarships, grants, 529 distributions, gifts from Aunt Mary, money from parents, money you find on the street, etc. etc. etc.
Understand that there is no requirement for the parent to claim the student as a dependent on their tax return. They key word is "QUALIFY'. So if the parents *qualify* to claim the student as a dependent, then if the student is required to file a tax return the student must select the option for "I can be claimed on someone else's return". It flat out does not matter if the parents actually claim the student or not.
So while the parents may have a choice to claim the student or not, if the parents qualify to claim the student, then the student does not have a choice.
