topic If person has $200 earned income, $8100 of unearned income, attends college full time, is 18 and receives less than 10% of support from parents, can she file separately? in Get your taxes done using TurboTax

If person has $200 earned income, $8100 of unearned income, attends college full time, is 18 and receives less than 10% of support from parents, can she file separately?

kblack1939 — Thu, 06 Jun 2019 05:37:33 GMT

Due to parents income level, filing 8515 causes taxes to be higher.

What kind of unearned income? Who provides the other 90%...

SweetieJean — Thu, 06 Jun 2019 05:37:35 GMT

What kind of unearned income?
Who provides the other 90% of her support? Did she live with them in 2016?

The 18 year old person would need to provide over 50% of...

re2boys — Thu, 06 Jun 2019 05:37:36 GMT

The 18 year old person would need to provide over 50% of their own support to qualify to claim themselves. The cost of college is included in determining "support" Support also includes food, actual or fair rental value of housing, clothing, transportation, medical expenses, and recreation.

Dividends and capital gains in her Schwab account. She l...

kblack1939 — Thu, 06 Jun 2019 05:37:38 GMT

Dividends and capital gains in her Schwab account. She lived with divorced parents about 25% of time each--mostly off at college.

75% of support including all items mentioned above were...

kblack1939 — Thu, 06 Jun 2019 05:37:39 GMT

75% of support including all items mentioned above were provided by grandparents

@re2boys Then maybe grandparents can claim her?

SweetieJean — Thu, 06 Jun 2019 05:37:41 GMT

@re2boys Then maybe grandparents can claim her?

tax results are best if she just claims herself (no tax due)

kblack1939 — Thu, 06 Jun 2019 05:37:42 GMT

tax results are best if she just claims herself (no tax due)

But the rules must be followed.

SweetieJean — Thu, 06 Jun 2019 05:37:43 GMT

But the rules must be followed.

Since the student has more than $6300 of taxable income,...

Carl — Thu, 06 Jun 2019 05:37:45 GMT

Since the student has more than $6300 of taxable income, the student will file a tax return no matter what. As for support, there is no requirement for the parents to provide a collage student any support - not one penny. The parent can still qualify to claim the student as a dependent anyway. The key word here is *QUALIFY*. Weather they claim the student as a dependent or not, is irrelevant. The support requirement is on the student - not the parent. Read the below *very carefully*, as every single word is carefully chosen, and matters.

College Education Expenses

Colleges work in academic years, while the IRS works in calendar years. So the reality is, it takes you 5 calendar years to get that 4 year degree. With that said:

- Scholarships and grants are claimed/reported as taxable income (initially) in the year they are received. It does not matter what year that scholarship or grant is *for*

- Tuition and other qualified education expenses are reported/claimed in the tax year they are paid. It does not matter what year they pay *for*.

Understand that figuring out who claims the student as a dependent, and determining who claims the education expenses & credits, is two different determinations. It depends on the specific situation as outlined below. After you read it, I have also attached a chart at the bottom. You can click on the chart to enlarge it so you can read it. If it’s still to hard to read on your screen then right-click on the enlarged image and elect to save it to your computer. Then you can double-click the saved image file on your computer to open it, and it will be even easier to read.

Here’s the general rules gisted from IRS Publication 970 at http://www.irs.gov/pub/irs-pdf/p970.pdf Some words are in bold, italicized, or capitalized just for emphasis. This is because correct interpretation by the reader is everything. Take the below contents LITERALLY, and do not try to “read between the lines”. If you do, you’ll interpret it incorrectly and risk reporting things wrong on your taxes. For example, there is a vast difference between “can be claimed” and “must be claimed”. The first one indicates a choice. The second one provides no choice.

If the student:

Is under the age of 24 on Dec 31 of the tax year and:

Is enrolled in an undergraduate program at an accredited institution and:

Is enrolled as a full time student for one academic semester that begins during the tax year, (each institution has their own definition of a half time student) and:

the STUDENT did NOT provide more that 50% of the STUDENT’S support (schollarships/grants received by the student ***do not count*** as the student providing their own support)

Then:

The parents will claim the student as a dependent on the parent's tax return and:

The parents will claim all schollarships, grants, tuition payments, and the student's 1098-T on the parent's tax return and:

The parents will claim all educational tax credits that qualify.

If the student will be filing a tax return and:

The parents qualify to claim the student as a dependent, then:

The student must select the option for "I can be claimed on someone else's return", on the student's tax return. The student must select this option ieven f the parent's qualify to claim the student as a dependent, and the parents do not claim them.

Now here’s some additional information that may or may not affect who files the 1098-T. If the amount of scholarships/grants exceeds the amount of qualified education expenses, the parent will know this when reporting the education on their tax return, because the parent will not qualify for any of the tax credits. (They only qualify for tax credits based on out-of-pocket qualified expenses not covered by scholarships/grants.) Also, the parent’s will not qualify for the credits depending on their MAGI which is different for each credit, and depends on the marital status of the parent or parents.

In the case where scholarships/grants covers “all” qualified education expenses, the parent’s don’t need to report educational information on their dependent student at all – but they still claim the student as a dependent if they “qualify” to claim the student.

If the scholarships/grants exceed the qualified education expenses, then the student will report the 1098-T and all other educational expenses and scholarships/grants on the student’s tax return. The student will pay taxes on the amount of scholarships/grants that are not used for qualified education expenses. However, if the student’s earned income reported on a W-2, when added to the excess scholarships/grants does NOT exceed $6200, then the student doesn’t even need to file a tax return, and nothing has to be reported.

If the student has any other taxable income not reported on a W-2, and it exceeds $400, (not including taxable portion of scholarships/grants) then most likely it’s considered self-employment income. That will require a tax return to be filed and the student will have to pay the Self-Employment tax on that income.

Finally, regardless of the student’s W-2 earnings, if any taxes were withheld on those earnings and it was less than $6200, then the student should file a tax return so as to get those withheld taxes refunded.

1099-Q Funds

First, scholarships & grants are applied to qualified education expenses. The only qualified expenses for scholarships and grants are tuition, books, and lab fees. that's it. If there is any excess, then it's taxable income. It automatically gets transferred to line 21 of the 1040 with an annotation of "SCH" next to it.

Next, 520/Coverdell funds reported on 1099-Q are applied to qualified education expenses. The qualified expenses for 1099-Q funds are tuition, books, lab fees, AND room & board. That's it. If there are any excess 1099-Q funds they are taxable. The amount is transferred to line 21 of the 1040 with an annotation of "SCH" next to it.

Finally, out of pocket money is applied to qualified education expenses. The only qualified expenses for out of pocket money is tuition, books, and lab fees. Room & board is NOT a qualified expense for out of pocket money.

When you have a 1099-Q it is extremely important that you work through the education section of the program in the order it is designed and intended to be used. If you do not, then there is a high probability that you will not be asked for room & board expenses, and you could therefore be TAXED on your 1099-Q funds.

Finally, if "all" qualified expenses are covered by scholarships, grants, 1099-Q funds and there is ANY of those funds left over that are taxable, then while the parent can still claim the student as a dependent, it is the student who will report all the education stuff on the student's tax return. That's because the STUDENT pays the taxes on any excess scholarships, grants and 1099-Q funds.

Without including tuition paid by the grandparents, the s...

kblack1939 — Thu, 06 Jun 2019 05:37:46 GMT

Without including tuition paid by the grandparents, the student would have paid more than 50% of own support (using unearned income)

See worksheet 3-1 in IRS Pub 17 to figure support.
macuser_22 — Thu, 06 Jun 2019 05:37:48 GMT
See worksheet 3-1 in IRS Pub 17 to figure support.
<a rel="nofollow" target="_blank" href="https://www.irs.gov/publications/p17/ch03.html#en_US_2016_publink1000170907">https://www.irs.gov/publications/p17/ch03.html#en_US_2016_publink1000170907</a>

You can't include tuition paid by anyone else as you prov...

Carl — Thu, 06 Jun 2019 05:37:50 GMT

You can't include tuition paid by anyone else as you providing your own support anyway. So that doesn't figure in. However, support is not defined in monetary terms only. If you used any schoarships, grants, 1099-Q funds or anything else that is not "your" taxable money, then you did not provide the support. For example, if you lived at home or with your grandparents, or a friend's house, and you don't pay rent and/or don't have a legally recognized rental contract to prove you did, then whoever housed you provided you housing. You didn't provide and pay for your own housing. That counts as support provided to you by a third party. Macuser's reference will work you through this.

I believe you are asking about IRS Form 8615 - there is n...

TomD8 — Thu, 06 Jun 2019 05:37:54 GMT

I believe you are asking about IRS Form 8615 - there is no Form 8515. Here are the IRS rules as to when Form 8615 must be filed:

Form 8615 must be filed for any child who meets all of the following conditions:

1. The child had more than $2,100 of unearned income.
2. The child is required to file a tax return.
3. The child either:
    a. Was under age 18 at the end of 2016,
    b. Was age 18 at the end of 2016 and did not have earned income that was more than half of the child's
        support, or
   c. Was a full-time student at least age 19 and under age 24 at the end of 2016 and did not have earned
       income that was more than half of the child's support. (Earned income is defined later. Support is defined
       below.)
4. At least one of the child's parents was alive at the end of 2016.
5. The child does not file a joint return for 2016.

For these rules, the term “child” includes a legally adopted child and a stepchild. These rules apply whether
or not the child is a dependent. These rules do not apply if neither of the child’s parents were living at the end of the year.

https://www.irs.gov/pub/irs-pdf/i8615.pdf

That is correct. The 8615 is independent of whether the...

macuser_22 — Thu, 06 Jun 2019 05:37:56 GMT

That is correct. The 8615 is independent of whether the child is a dependent or not. The tax on the unearned income must be calculated at the parents tax rate reguardless if the child as a dependent or not.