Can you claim the child as a dependent and for the child based refundable credits? Yes, most likely.
A child (or other close relation) of a taxpayer can still be a “Qualifying Child” (QC) dependent, regardless of his/her income, if:
1. 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
2. He did not provide more than 1/2 his own support. Scholarships are
considered third party support and not as support provided by the student.
3. He lived with the parent
(including temporary absences such as away at school) for more than half
the year
So, it doesn't matter how much income he has. What matters is how much he spent
on support. Money he put into savings does not count as support he spent on him
self.
The support value of the home you provided is the fair market rental value
of the home plus utilities & other expenses divided by the number of
occupants. The
IRS has a worksheet that can be used to help with the support calculation. See:
http://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf
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Social security payments
to children.
If the Social Security
(SS) payments, including SS disability, were under his/her SS number (as they
usually are), it does not get reported on your return. If it does need to be
reported, it would go on his/her individual return. If that was his/her only
income, it does not get reported at all. She does not need to file a tax
return.
SS is only taxable &
reportable when added to sufficient other income. Social security only
becomes taxable, when his income, including 1/2 his social security, reaches
$25,000
You may still claim him, as a
dependent, as long as he is not providing more than 1/2 his own support
(including the social security being spent on him). Any part of his SS $ put
into savings does not count as support.
Note that the requirement is
not that you provide more than 1/2 his support (as it is with non
child dependants , but only that he didn't provide 1/2.
Here's a good article on the
subject:
http://www.fool.com/taxes/2002/taxes020315.htm
