Adult child is salaried, full time and lives at home; can still be claimed as dependent?

[Prethen]

My child will be working as a salaried, fully time employee (over $30K/year) starting later this year and living at home with us. We still pay all their basic food and living expenses and they don't pay rent. Can we still claim them as a dependent?

[xmasbaby0]

No.   If your adult child is not a full-time student and makes over $4300 you cannot claim him as a dependent.

[Prethen]

Thanks for your response. Would you mind pointing out the part of the IRS Form/Code that I can read up on that?

[xmasbaby0]

Try this IRS interactive tool:

IRS interview to help determine who can be claimed:

https://www.irs.gov/help/ita/who-can-i-claim-as-a-dependent

[xmasbaby0]

WHO CAN I CLAIM AS A DEPENDENT?

You can claim a child, relative, friend, fiance (etc.) as a dependent on your 2019 taxes as long as they meet the following requirements:

Qualifying child

•They are related to you.

•They cannot be claimed as a dependent by someone else.

•They are a U.S. citizen, resident alien, national, or a Canadian or   Mexican resident.

•They are not filing a joint return with their spouse.

•They are under the age of 19 (or 24 for full-time students).

• No age limit for permanently and totally disabled children

  •      They live with you for more than half the year (exceptions apply).

Qualifying relative

•They don't have to be related to you (despite the name).

•They cannot be claimed as a dependent by someone else.

•They are a U.S. citizen, resident alien, national, or a Canadian or Mexican resident.

•They are not filing a joint return with their spouse.

•They lived with you the entire year.

•They made less than $4300  (not counting Social Security)

•You provided more than half of their financial support. More info

When you add someone as a dependent, we'll ask a series of questions to make sure you can claim them.

Related Information:

•Does a dependent have to live with me?

•What does "financially support another person" mean?

•Can I claim a newborn baby?

[DoninGA]

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@Prethen wrote:

Thanks for your response. Would you mind pointing out the part of the IRS Form/Code that I can read up on that?

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Qualifying Relative rules  - IRS Publication 501 page 17 - https://www.irs.gov/pub/irs-pdf/p501.pdf#page=17

[Hal_Al]

There are two types of dependents, "Qualifying Children"(QC) and standard ("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. Only a QC qualifies a taxpayer for the Earned Income Credit. They are interrelated but the rules are different for each.

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:

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 excluded from the support calculation
3. He lived with the parent (including temporary absences such as away at school) for more than half the year

A person can still be a Qualifying relative dependent, if not a Qualifying Child, if he meets the 6 tests for claiming a dependent:

1. Closely Related OR live with the taxpayer ALL year
2. His/her gross taxable income for the year must be less than $4300 (2020).
3. The taxpayer must have provided more than 1/2 his support

In either case:

4. He must be a US citizen or resident of the US, Canada or Mexico
5. He must not file a joint return with his spouse or be claiming a dependent of his own
6. He must not be the qualifying child of another taxpayer

See full dependent rules at: https://turbotax.intuit.com/tax-tools/tax-tips/Family/Rules-for-Claiming-a-Dependent-on-Your-Tax-Ret...

[Prethen]

So, the crux might be the 5 month Full Time Student criterion. I believe the graduation is in May, but there will be limited instruction in May (if any). It would be a shame if they were actually only in school through April and I miss out one last time on the deduction.

[Hal_Al · Accepted solution]

Even 1 day in May qualifies as the fifth month.  Even if classes end in April and the graduation ceremony is on May 1, May counts as the fifth month. 

For most students, the graduation year is the 5th calendar year of attending school.  There is a 4 time limit for claiming the more generous American Opportunity Credit. If you already claimed it 4 times, you may have to settle for the lesser Lifetime Learning Credit (LLC) or the tuition and Fees deduction (TFD). 

[Prethen]

So, my specific case would be as Hal_Al pointed out. She is graduating in the second week of May, her last day of internship/instruction is April 30, and finals for the rest of the student body take place during the first full week of May (but she's not participating in any finals). I want to be certain I'm not running afoul of IRS rules. What's the specific section/rule that I need to review on this?

[Hal_Al]

She is still an enrolled student during finals weeks. So she was a student for 5 months.

That's an interpretation. I don't think you'll find that exact language in the IRS pubs. See Pub 970 and Pub 501

[Prethen · Accepted solution]

I also see on another search that found responses in these forums (Solved: Am I considered a full-time student? (intuit.com)) that she should be considered full-time since that's what the school considered her since she enrolled (and essentially participated) for the full semester.