Dependent college student

[JJJess]

My child earned $13,000 last year and was a full-time college student.  She received a 1098-T from her school. Should she file taxes on her own or can I claim her on my taxes? Is she required to file?

[MindyB]

She may not need to file a tax return. In 2024, if she made less than $14,600 (and less than $400 of self-employment income), and did not have federal income taxes withheld that she'd like a refund of, then a federal tax return isn't required.  The state rules vary, so you'll need to check your state rules to see if she is required to file a state return. If you end up claiming her as a dependent, be sure she checks the box that someone else can claim her as a dependent in the TurboTax interview.

Whether she can claim herself depends on a few things.  If she provided more than half of her own support she'll claim herself and tax the education credit, otherwise (as long as she meets all the other requirements for a dependent, below) you will claim her as a dependent and take the education credit, if you qualify.

Here are the rules for a qualifying child, from Rules for Claiming Dependents on Taxes:

• "Are they related to you? The child can be your son, daughter, stepchild, eligible foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister, adopted child or an offspring of any of them.
• Do they meet the age requirement? Your child must be under age 19 or, if a full-time student, under age 24. There's no age limit if your child is permanently and totally disabled.
• Do they live with you? Your child must live with you for more than half the year, but several exceptions apply.
• Do you financially support them? Your child may have a job, but they cannot provide more than half of their own support."

[JJJess]

Thank you Mindy for your response, it was very helpful!

To confirm: She does not provide more than half of her own support and lives with me full-time, so I can claim her as a dependent. If I do claim her as a dependent do I add her income from her W2?  And with the 1098-T received from her school, box 5 is a greater amount than box 1, will that change things when I claim her?

[MindyB]

Yes, in that case you will claim her as a dependent.  

You can not add her W-2 to your return. If required to file, she'll need to file her own return and enter that she can be claimed as a dependent.

Yes, that does change things.  The education credits are to be claimed by the parents if the student is a dependent, but Box 5 being greater than 1 means that there is no credit available- instead there is taxable income.  Your daughter will report the 1098-T on her return and will incur tax on the amount that Box 5 exceeds 1 except to the extent there are other qualified education expenses, as these amounts can be entered to reduce the tax impact- books, supplies, fees, etc.

[JJJess]

Got it!

To confirm: She will file her own return - report her W2 amounts and report amounts from the 1098-T form. Also, she is to enter that she can be claimed as a dependent. I will claim her but not report the 1098-T form because she will do that. Correct?

[DawnC]

That will work.  She will have taxable scholarship income for the amount that the scholarship exceeds her qualified education expenses.   

Depending on the amounts on her 1098-T and your income level, it may be possible for you to take an education credit on your return.   You can try having her enter less expenses on her return - which will increase her taxable income, but allows you to claim those expenses on your return.   The education credit on your return may be higher than the additional tax your daughter will pay on her return.  

The IRS recommends you handle the scholarship income and education expenses in the way that provides the best financial outcome for your family.    This link is to a IRS slideshow presentation from 2014 - but the information is still valid.