Q. Should 1098-T issued to the child be reported on either return?
A. The 1098-T is only an informational document (as is the 1099-Q). The numbers on it are not required to be entered onto anybody's tax return. However receipt of a 1098-T frequently means you are either eligible for a tuition credit or possibly the student has taxable scholarship income.
Q. Parents included 1099-Q on their return and reported tuition paid as an offset. Is this correct?
A. Probably not. The parents should first use room and board (R&B) to offset the distribution. The student may need the tuition, fees, books and a computer to claim the tuition credit and/or keep the scholarship tax free. R&B are not qualified expenses for the tuition credit or tax free scholarship.
There needs to be coordination between student and parents in allocating expenses, for tax purposes. It's even possible that nothing gets entered on anybody's return. More info is needed.
Age, alone, does not disqualify you child from being your dependent.
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 and student status test, a relationship test and a residence test. She is too old to be a QC. 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 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
