The 19 year old is your qualifying child dependent if,
1. he lives with you more than half the year except for temporary absences (being away at college is considered a temporary absence and the child is deemed to live with if they would have lived with except for college).
2. the child does not pay more than half his own support.
A person's support includes rent (or the fair rental value if they live free in someone else's home) , food, clothing, entertainment, travel and education expenses. Because the child paid expenses from an account that the child owns (even if it was funded by others, it is now owned by the child) that is support the child pays for themself. However, you can take credit for room and board you provide while the child lives in your home over the summer. Since the child lives in your home all year for tax purposes (assuming this is true and not a divorce situation, and assuming you really do maintain a home for them in your home) you can probably take credit for providing them with rent and utilities for the whole year. That may drive up the child's total living expenses high enough that the amount paid from the child's funds ends up less than half. If not, they are not your dependent. There is a worksheet in publication 501 to help figure this out. https://www.irs.gov/uac/about-publication-501
Child #1 is too old to be a qualifying child dependent but can be a qualifying relative dependent if
1. they earn less than $4000 of taxable income
2. and you provide more than half of their total support.
Again, you must add up all the child's support costs (rent, food, travel, entertainment, education, etc.) and figure out how much is paid by the child, by you, and by the grandparents. If you provide more than half the support, you can claim the child as a dependent. If the grandparents provide more than half, they can claim the child as a dependent. If no one pays more than half, then anyone who pays at least 10% of support can claim the child as a dependent if they get a signed multiple support agreement from everyone else who also pays more than 10% of the support. If no one pays more than half and there is no signed MSA, then no one can claim the child as a dependent.
