Should I NOT claim my child as a dependent?

[Bill in KS]

Situation:

• Child was 23 at end of 2019 and full time student.
• Child was a dependent on parent 2018 return.
• Child (or parent for this child) has never received American Opportunity or Lifetime Learning college tax credits.
• Most of college expenses were submitted for a distribution from 529 account. Owner is a parent, beneficiary is a child on the 1099Q.
• Child received a modest scholarship from the school of $3500 against approx $22000 tuition. The distribution from the 529 was for expenses after the scholarship was use for tuition.
• Child had no earned income in 2019. Only a very small amount of interest from checking accounts. (less than $75)
• Due to age, child will not be eligible as dependent for 2020 taxes.

My questions are:

1. Should I NOT claim the child as a dependent for 2019, since this may make the child eligible for the college tax credits? I am aware that I would be giving up a $500 child tax credit, but assume she may be eligible for a larger credit.
2. What effect will claiming the child as a dependent in 2019 have on the child's eligibility for the Coronovirus Stimulus check? If it is based on 2018, then the child is my dependent. I assume the child will NOT get a check, but will be eligible for a credit when filing the child's taxes for 2020. Is this the same for 2019?
3. Lastly, do the answers to #2 really just all get "reconciled" when the child files 2020 taxes? If child gets a check now (mid 2019), will count as a credit already received on 2020 taxes. If child does not get a check now (mid 2019), will child get a credit on 2020 taxes - and if so, is this refundable?

[KrisD15]

The easiest thing to answer is that you can choose to not claim your daughter, but if she is your dependent (and it sounds like she is ) she cannot claim her own exemption either. The IRS is strict on this, they don't allow you to let your dependents claim themselves. 

There are two questions in the TurboTax program 

Someone else can claim me

Someone else will claim me. 

She could select "No" to "Someone else will claim me" but she would need to select "Yes" to "Someone else can claim me"

1. Why don't you claim the education credit?

2. I don't know how this would affect the child's eligibility to receive a stimulus check since the credit is technically for tax year 2020. If he is not your dependent and files his own 2020 return, I ASSUME he would get a credit. It most likely will be a refundable credit. 

BUT the details have not been ironed out yet.

Below is a link to the most recent news: 

IRS Updates

[Bill in KS]

Thank you for your response.

I cannot claim the Education Credit due to too high of AGI/MAGI. Since my child has almost no AGI/MAGI, I thought it would be better for her to be able to claim the Education Credits - unless she is somehow inelegible.

[Hal_Al]

She is ineligible for the tuition credit.

A full time unmarried student, under age 24, is only eligible for the refundable portion of the American Opportunity Credit if he supports himself by working (earned income). She cannot be supporting herself on parental support, 529 plans or student loans & grants. She usually must have actually paid tuition, not had it paid by scholarships & grants.  It is usually best if the parent claims that credit. 

There is a provision to allow the parent to forgo the student's dependency (and the $500 credit) to allow the student to claim the NON-refundable portion of the credit.  But, since your student has no tax liability, that doesn't work for you.

[Hal_Al]

Question #2 is academic.  She is not eligible to claim herself for 2019, even if you don't claim her,  and cannot get a stimulus check (as I understand it). 

[AmeliesUncle]

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@Bill in KS wrote:

• Due to age, child will not be eligible as dependent for 2020 taxes.

1. If child does not get a check now (mid 2019), will child get a credit on 2020 taxes - and if so, is this refundable?

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Because she was your dependent in 2018/2019, she will not receive a check.  But yes, if she does not qualify as a dependent in 2020, she will receive that refundable credit on her 2020 tax return.