College student dependent

[ddd6432]

 My daughter is 18 and just started as a full-time college student living on campus back in Sept. 2019. Before that, she lived between myself and my ex-husband. I financially supported her for the most of the year. We also used her fathers income for her FASFA because he has very little income and she benefits from that. So my question is, should I claim her as a dependent, or would it benefit her the most to claim herself? She also worked part-time throughout the year. I also don't want to mess up anything with her financial aid!! Thank you

[Bsch4477]

There are 2 issues. 

1. Who can claim her?   The parent that she lived with more nights is the one who can claim her. Nights at school would be considered as divided equally between you and your ex.  If you can’t agree on that, the parent with the higher AGI gets to claim her.  

2  Should she file independent of you. The law is that if you CAN claim her she must say that on her return.  So she really can’t file independently.  By claiming her you get tax advantages like filing as head of household if you are unmarried, other child tax credit, and earned income credit if otherwise qualified. 

[ddd6432]

 She lived with both of us equally , but I guess my biggest concern is that I don't want there to be a chance of her financial aid to be compromised because she listed her Dad as whom she lived with so she could benefit from his low income. She couldn't list both of us when she did her FASFA. Thank you

[Hal_Al]

There is a special rule for divorced parents.  From what you describe, the father is the custodial parent. As long as he doesn't try to claim her, it is OK for you to do so.  If she is your dependent, you can claim the very generous tuition credit (up to $2500). You cannot claim the Earned Income Credit (EIC), based on her as qualifying child, because she didn't live with you enough. 

As others have said, she cannot claim herself. Also, students under age 24 are not eligible for the refundable portion of the tuition credit.

The FASFA eligibility  question can't be answered in this tax forum.

Either parent can claim her. Either  would be eligible for the tuition credit, but only the father would be eligible for the EIC. It may be worthwhile, preparing returns both ways to see which way comes out best.  You can use this tool: https://turbotax.intuit.com/tax-tools/calculators/taxcaster/?s=1

[ddd6432]

Your response was very helpful. 

                 Thank you!

[Carl]

Determining who can claim the student as a dependent, and who can claim the education expenses are two totally separate determinations that are independent of each other.

She lived with both of us equally

Not possible, since there are 365 nights in a tax year. She lived with one of you "at least" one more night than she did with the other. But in the case of a tie, the IRS rules state that the one with the higher AGI gets to claim her. Based on the information you've provided, the father has the higher AGI and therefore that makes him the custodial parent as far as the IRS is concerned and that gives him the legal right to claim her. That being the case, he can provide you with a signed IRS Form 8332 relinquishing his right to claim her, to you. Then you can claim her with no issues or potential repercussions.

I financially supported her for the most of the year.

That actually does not matter for a college student under the age of 24 that attended college as a full time student for any one semester that started in the tax year. In fact, there is no requirement for the parent(s) to provide the student any support. Not one single penny. The support requirement is on the student, and only the student. That requirement states:

"If the student did not provide more than 50% of their own support during the tax year, then the parent(s) qualify to claim the student as a dependent on the parent(s) tax return. Scholarships, grants, 529 distributions, gifts from Aunt Mary, etc *do* *not* *count* for the student providing their own support. "

Now take special note of the above. The key word is "QUALIFY". So if the parent(s) just *qualify* to claim the student as a dependent and if the student is required to file a tax return, then the student *must* select the option for "I can be claimed on someone elses tax return". It does not matter if the parent(s) actually claim the student or not.

While not unheard of, it is rare for an undergraduate student to provide more than half of their own support. If they claim that they do, then they can fully expect to be audited on it 24-36 months after they file a tax return making such a claim.

The TurboTax program includes the IRS Form 8332 which can not be e-filed. It has to be filled out, printed and signed by the custodial parent, and given to the non-custodial parent so they can claim them as a dependent on their tax return.

It can be found under the Other Tax Situations tab in the Miscellaneous Tax Forms section. So if the father is using TurboTax, that's where he can find the form.