Under the qualifying relative gross income test, can a contribution to an IRA reduce gross income?

[dwhewlings]

My daughter turned 24 in Dec 2018 and is a full-time student in college. I'd like to include her as a dependent on my 2018 return. Because of her age, she no longer meets the Qualifying Child test, so now I'm exploring the Qualifying Relative test, which limits her to $4150 in gross income. According to Publication 17, "gross income is all income in the form of money, property, and services that isn't exempt from tax." Between a W-2, 1099-MISC and 1099-INT, she made slightly more than $4150 in 2018. Can we bring her "gross income" below the limit by contributing to an IRA, which is exempt from tax? Thanks for your help.

[KrisD · Accepted solution]

Good idea, but no. 

The contribution may lower her "Adjusted Gross Income" but not her "Gross Income" for purposes of the qualifying relative. 

An example of income exempt from tax would be a tax-free scholarship or interest on state and municipal bonds.