Stimulus Payment Eligibility

[mjano]

My son graduated from college spring 2020 and found a full time job November 2020. Technically he can still qualify as a dependent on my taxes, but if I did not claim him as a dependent he would qualify for the Stimulus Recovery Rebate Credit. Is that legal to do?

[MinhT1]

You do not pick and choose whether you claim your son as a dependent.

If he is under 24 and a full time student and you provide more than half of his support for the tax year, you can claim him as a dependent. If you do not claim him, then you lose the Other dependent credit of $500 and you cannot claim his education credit from his form 1098-T.

On his own tax credit, he is asked the question whether he paid more than half of his own support. If the answer is No, then he has to say that he can claimed as a dependent by someone else. And he will not be eligible for the stimulus payments. As someone who can be claimed as a dependent but is not actually claimed, he can claim the non-refundable part of the American Opportunity credit, but not the refundable part.

[Hal_Al]

Q. If I did not claim him as a dependent he would qualify for the Stimulus Recovery Rebate Credit?

A. No. If he qualifies as your dependent, he must indicate that on his tax form (a box to be checked), whether you claim him or not.  That disqualifies him from getting the Rebate Credit.

Q. Is that legal to do?

A. No. 

__________________________________________________________________________________________

Graduation year

If he/she was a student (under 24) for at least 5 months and lived with you for more than half the year, and did not provide more than 1/2 his own support for the whole year, you can still claim him. Be sure he knows you're claiming him, so he doesn't claim himself. He can only be claimed once. But, he can "file taxes" without claiming his own exemption.

The real question is who should be claiming him in this "transition" year to adulthood. You two have to agree on who is going to claim his exemption. Each should do their taxes both ways and see which way the family comes out best.  Even then, you have to meet the rules. The rule is that a child of a taxpayer can still be a “Qualifying Child” dependent, regardless of  his income, if:

1. he is a full time student under 24 for at least 5 calendar months of the year (graduating in May usually means you meet the 5 month rule)
2. he did not provide more than 1/2 his own support  (scholarships are considered 3rd party support and not support provided by the student). 
3. lived with the parent (including time away at school) for more than half the year

So, it usually hinges on  "Did he provide more than 1/2 his own support in 2020.

The support value of the home you provided is the fair market rental value of the home plus utilities & other expenses divided by the number of occupants. IRS Publication 501 on page 20 has a worksheet that can be used to help with the support calculation. See: http://www.irs.gov/pub/irs-pdf/p501.pdf

[mjano]

Thank, I asked the IRS and they were noncommittal about answering the question.