Choosing not to claim a dependent

[ManVaz_27]

I have 23-year-old son who graduated college in 2022 and fully employed as of June 2022. Lives at home and I did provide more than half of his support, so by IRS rules I can claim him. My understanding is I can choose not to, and he must indicate on his return that he can be claimed by someone, but that person will not claim him. 

On my return, do I simply remove him as a dependent or leave him on my return as a dependent and indicate I don't want to claim him? I did not see an option in Turbo Tax to keep him as a dependent and not claim him, my guess is I have to remove him as a dependent. 

Thank you

[Carl]

You just delete him off your return and call it good. Just remind your son that "if" you qualify to claim him, he still has to indicate that he "can" be claimed on another tax return. You appear to already know the rest, so I'll stop here.

[ManVaz_27]

Great, thank you for the quick response, much appreciated!

[Hal_Al]

Why do you not want to claim him? What tax benefit do you think he can get?  

With the tax law change, effective 2018, most students will get the same refund whether they claim themselves or not. The personal exemption has been eliminated and the standard deduction increased. But, the parent has to give up the $500 other dependent credit and maybe the earned Income Credit.

The Education credit may also be better if the parent claims it. 

[ManVaz_27]

Originally, I thought the same, however when filling out his tax return it makes a big difference for him if
I don't claim him, roughly $2500. The big item is the education credit he gets from his 1098-T for his student loan.

I have not completely filled out my return yet with and without him as a dependent to see the difference, I may try that both ways and see what the difference is then compare what is the better way to go. I think I am ok to do it either way, just trying to see which way works best. 

Thanks again. 

[Hal_Al]

Yes, try it both ways. With him as a dependent, you should be eligible for the same $2500 turion credit.  So, all things equal, the family should come out $500 ahead if you claim him as a dependent.

Normally a student-dependent, under 24, is not eligible for the full tuition credit. If the student actually has a tax liability, there is a provision to allow him to claim a non-refundable tuition credit. But then the parent must forgo claiming the student as a dependent, and the $500 other dependent credit.  The student must still indicate that he can be claimed as a dependent, on his return. This is worth up to $2500 (AOTC shifts to all non refundable).

He's not old enough for the Earned Income Credit.