Our 23 year old child full time student used money from gifts from us (parents) to pay for clothing, other items, and a car. Did she provide this support or did we?

[stitch0991]

This is a dependent support test question.  Our daughter is 23 years old.  Graduated college May 2018. Was full time student.  Had part time job during college and full time job starting in June 2018.  She lived at home.  She meets all dependent tests but I am having trouble confirming whether or not she provided more than 50% of her own support.  If she did not then she is dependent and we would get $500 child credit but do not qualify to claim an education credits.  If she did provide more than 50% of her own support then her tax refund would increase by $1,000 due to an education credit.  I did both of our taxes both ways in Turbo Tax to figure this out.  Just want the right answer the I can defend if need be.

[Vanessa · Accepted solution]

If you are giving her the money even if it is as a gift, you are providing that money/support.  So if your gifts provided more than half of her support, you can claim her, but you don't have to. 

In order for her to claim the education credits, she can't be claimed.  This years instructions for form 8863 (education credits) just say "You cannot be claimed as a dependent"  It does not say you cannot be eligible to be claimed.  So if you do not claim her, she can take the credit. 

https://www.irs.gov/pub/irs-pdf/i8863.pdf

[stitch0991]

thank you.  How does a private student loan that she took out but I cosigned figure into the support question.  Support provided by her, or support provided by me?

[stitch0991]

thank you.  How does a private student loan that she took out but I cosigned figure into the support question.  Support provided by her, or support provided by me?

[Vanessa]

If she is paying it, then it would be hers

[stitch0991]

Looking at 8863 and the question about whether earned income is less than half of total support, I want to make sure she does not include costs in support that should not be there. The higher the support the less likely her earned income will be more than half of her total support.  Is the cost of car the car she purchased in 2018 included in total support?  I thought it was, but I posted that specific question and it was answered by someone saying that the cost of the car is not included in total support.  It was a $15,000 purchase, so it would be a significant contribution to calculating total support if it has to be included.