Removing college-age daughter as dependent

[Lanric02]

I removed my daughter in college as a dependent from my return.  When I go to file her return, some odd things happen:

When I answer the question (Do any of these apply to XXX) in the personal info section, if I select 'someone else can claim XXX on their tax return' and then 'no one will claim XXX on their tax return', two things happen:

1. The Recovery Rebate Credit does not appear.

2. She can not get the full standard deduction of $12,400.  Instead it calculates based on adding $350 to earned income.

If I answer the question  (Do any of these apply to XXX)  as 'none of the above':

1.  The Recovery Rebate Credit appears.

2.  She gets the full standard deduction of $12.400.

Any idea what is going on?

[DaveF1006]

Yes, by originally checking select 'someone else can claim XXX on their tax return' and then 'no one will claim XXX on their tax return, the program will treat your daughter like she is a dependent thus not be eligible for the Standard Deduction and the Recovery Rebate Credit. When you select none of the above, which is correct in this case, she is now eligible for the Standard Deduction and the Recovery Rebate Credit. leave it here.

[Lanric02]

Thanks.  What is the point of that box that says nobody will claim her as a dependent? 

[ColeenD3]

It is because some parents mistakenly think that just because they refrain from claiming their child, that their child will be treated as independent and qualify for benefits that they really are not entitled to. So, if you check that you will not claim her, but that you could claim her, then she will not get the benefit. You have the choice not to claim her, but not the choice to have her be independent if she really isn't.

[Lanric02]

Hmm. I'm confused based on the response prior.   She is in college. Can I say none of the above so she can get the standard deduction and economic recovery rebate? 

[JoannaB2]

Yes, that's true. By removing your daughter as your dependent, she may receive the Economic Recovery Credit.. If her income was below her 1/2 of her support, she may have to file Form 8615, Tax for children who have unearned income..  Here's the scenarios:

1. Remove daughter as dependent - you don't file 8615, don't receive Other dependent credit for $500.
2. Daughter files her own - needs to file Form 8615 if her earned income was less than i/2 of her support from the parents and unearned income over $2,200.  If less, her tax will be based on parent's taxable income minus her taxable income. 

You may have to choose the option that will benefit you and daughter.

[AmeliesUncle]

Let me clarify things:

If you are ELIGIBLE to claim her daughter, she MUST say she CAN be claimed as a dependent.

If she CAN be claimed as a dependent (even if she is not actually claimed), she does NOT qualify for the Recovery Rebate Credit and her Standard Deduction is still based on being a dependent.   So in MOST cases, you SHOULD claim your daughter as a dependent if you are eligible to claim her.  She would not benefit if you do not claim her.

The purpose of that second box is for the American Opportunity Credit.  If your income is too high to qualify for the credit, you would not be able to claim it.  However, if you did not actually claim her as a dependent, she would have an opportunity to claim it on her return.  However, she only qualify for the NON-refundable portion of the credit, so very often the benefit would be minimal or non-existent.

So for emphasis:  If you are eligible to claim her as a dependent, she does NOT qualify for the Recovery Rebate Credit and is still subject to using the dependent Standard Deduction.  So in most cases, you SHOULD claim her.

[Lanric02]

Thank you.  I still think I will not claim her so she can get the new unemployment exclusion. Do you agree? 

[Hal_Al]

Q. Can I say none of the above so she can get the standard deduction and economic recovery rebate? 

A. No, because "none of the above" is not a true statement. 

[AmeliesUncle]

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@Lanric02 wrote:

Thank you.  I still think I will not claim her so she can get the new unemployment exclusion. Do you agree? 

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She can use the new unemployment exclusion even if you claim her as a dependent.

I haven't seen you say anything that would indicate you should not claim her.

[Lanric02]

Isn't it eliminated as well if family income is over $160K? 

[AmeliesUncle]

It the income on the tax return is over $150,000, it is eliminated.  Your income would not affect her unemployment exclusion, and her income would not affect your unemployment exclusion.

[Hal_Al]

Q. Isn't it eliminated as well if family income is over $160K? 

A.  No. There was some very poorly worded IRS postings that used the "family income" terminology. What they meant to say was a married couple was limited to $150,000 together and not $150K each