Q. If my son receives Chapter 35 VA Education benefits, can I still claim him as a dependent on my own tax return? He's full time in school.
A. Yes, probably.
There are two types of dependents, "Qualifying Children"(QC) and Other ("Qualifying Relative" in IRS parlance even though they don't have to actually be related). There is no income limit for a QC but there is an age limit, student status, a relationship test and residence test.
The support test is different for each type. The support test, for a QC, is only that the child didn't provide more than half his own support. The support test for a Qualifying Relative is that the taxpayer provided more than half the relative's support.
A child of a taxpayer can still be a “Qualifying Child” (QC) dependent, regardless of his/her income, if:
- He is under age 19, or under 24 if a full time student for at least 5 months of the year, or is totally & permanently disabled
- He did not provide more than 1/2 his own support. VA benefits would be considered third party support and not as support provided by the student. Scholarships are excluded from the support calculation.
- He lived with the parent (including temporary absences such as away at school) for more than half the year
So, if he is under 24 and lives with you, we look at the QC rules to see if he qualifies as a dependent. So, it doesn't matter how much he earned. What matters is how much he spent on support. And the VA benefits don't count against you. The support value of the home, provided by the parent, is the fair market rental value of the home plus utilities & other expenses divided by the number of occupants.
But if he does not qualify as a QC (he's over 23 or doesn't live with you), then we need to look at the qualifying relative rules and the VA benefits are support, not provided by you.
A person can still be a Qualifying relative dependent, if not a Qualifying Child, if he meets the 6 tests for claiming a dependent:
- Closely Related OR live with the taxpayer ALL year
- His/her gross taxable income for the year must be less than $5050 for 2024). The VA benefits are not counted as income, but they are counted as support not provided by you.
- The taxpayer must have provided more than 1/2 his support
In either case:
- He must be a US citizen or resident of the US, Canada or Mexico
- He must not file a joint return with his spouse or be claiming a dependent of his own
- He must not be the qualifying child of another taxpayer
