Can I claim my daughter if she is filing her own taxes for a refund

[Carl]

You'll want to print this and file it with your tax information for next year when you do your 2017 taxes. You'll need to read it through, probably several times. You should let your daughter read it to so you're both on the same page for this tax stuff next year.

For starters, if student loans will be used for college (which I HIGHLY HIGHLY discourage) make sure that you the parent are the primary borrower on the loan. If the student is the primary borrower, then you risk losing a LOT of the education credits and deductions. It can amount to quite a bit of money too.

• College Education Expenses

Colleges work in academic years, while the IRS works in calendar years. So the reality is, it takes you 5 calendar years to get that 4 year degree. With that said:

 - Scholarships and grants are claimed/reported as taxable income (initially) in the year they are received. It does not matter what year that scholarship or grant is *for*

- Tuition and other qualified education expenses are reported/claimed in the tax year they are paid. It does not matter what year they pay *for*.

Understand that figuring out who claims the student as a dependent, and determining who claims the education expenses & credits, is two different determinations. It depends on the specific situation as outlined below. After you read it, I have also attached a chart at the bottom. You can click on the chart to enlarge it so you can read it. If it’s still to hard to read on your screen then right-click on the enlarged image and elect to save it to your computer. Then you can double-click the saved image file on your computer to open it, and it will be even easier to read.

Here’s the general rules gisted from IRS Publication 970 at http://www.irs.gov/pub/irs-pdf/p970.pdf Some words are in bold, italicized, or capitalized just for emphasis. This is because correct interpretation by the reader is everything. Take the below contents LITERALLY, and do not try to “read between the lines”. If you do, you’ll interpret it incorrectly and risk reporting things wrong on your taxes. For example, there is a vast difference between “can be claimed” and “must be claimed”.  The first one indicates a choice. The second one provides no choice.

If the student:

Is under the age of 24 on Dec 31 of the tax year and:

Is enrolled in an undergraduate program at an accredited institution and:

Is enrolled as a full time student for one academic semester that begins during the tax year, (each institution has their own definition of a half time student) and:

the STUDENT did NOT provide more that 50% of the STUDENT’S support (schollarships/grants received by the student ***do not count*** as the student providing their own support)

Then:

The parents will claim the student as a dependent on the parent's tax return and:

The parents will claim all schollarships, grants, tuition payments, and the student's 1098-T on the parent's tax return and:

The parents will claim all educational tax credits that qualify.

If the student will be filing a tax return and:

The parents qualify to claim the student as a dependent, then:

The student must select the option for "I can be claimed on someone else's return", on the student's tax return. The student must select this option ieven f the parent's qualify to claim the student as a dependent, and the parents do not claim them.

Now here’s some additional information that may or may not affect who files the 1098-T. If the amount of scholarships/grants exceeds the amount of qualified education expenses, the parent will know this when reporting the education on their tax return, because the parent will not qualify for any of the tax credits. (They only qualify for tax credits based on out-of-pocket qualified expenses not covered by scholarships/grants.)  Also, the parent’s will not qualify for the credits depending on their MAGI which is different for each credit, and depends on the marital status of the parent or parents.

In the case where scholarships/grants covers “all” qualified education expenses, the parent’s don’t need to report educational information on their dependent student at all – but they still claim the student as a dependent if they “qualify” to claim the student.

 If the scholarships/grants exceed the qualified education expenses, then the student will report the 1098-T and all other educational expenses and scholarships/grants on the student’s tax return. The student will pay taxes on the amount of scholarships/grants that are not used for qualified education expenses. However, if the student’s earned income reported on a W-2, when added to the excess scholarships/grants does NOT exceed $6200, then the student doesn’t even need to file a tax return, and nothing has to be reported.

If the student has any other taxable income not reported on a W-2, and it exceeds $400, (not including taxable portion of scholarships/grants) then most likely it’s considered self-employment income. That will require a tax return to be filed and the student will have to pay the Self-Employment tax on that income.

Finally, regardless of the student’s W-2 earnings, if any taxes were withheld on those earnings and it was less than $6200, then the student should file a tax return so as to get those withheld taxes refunded.

•  1099-Q Funds

 First, scholarships & grants are applied to qualified education expenses. The only qualified expenses for scholarships and grants are tuition, books, and lab fees. that's it. If there is any excess, then it's taxable income. It automatically gets transferred to line 21 of the 1040 with an annotation of "SCH" next to it.

Next, 529/Coverdell funds reported on 1099-Q are applied to qualified education expenses. The qualified expenses for 1099-Q funds are tuition, books, lab fees, AND room & board. That's it. If there are any excess 1099-Q funds they are taxable. The amount is transferred to line 21 of the 1040 with an annotation of "SCH" next to it.

Finally, out of pocket money is applied to qualified education expenses. The only qualified expenses for out of pocket money is tuition, books, and lab fees. Room & board is NOT a qualified expense for out of pocket money.

When you have a 1099-Q it is extremely important that you work through the education section of the program in the order it is designed and intended to be used. If you do not, then there is a high probability that you will not be asked for room & board expenses, and you could therefore be TAXED on your 1099-Q funds.

Finally, if "all" qualified expenses are covered by scholarships, grants, 1099-Q funds and there is ANY of those funds left over that are taxable, then while the parent can still claim the student as a dependent, it is the student who will report all the education stuff on the student's tax return. That's because the STUDENT pays the taxes on any excess scholarships, grants and 1099-Q funds.

[tyfoltz]

thank you so very much! you have been very helpful

[Carl]

Glad to help. When your daughter gets enrolled in college, she'll have her own online college account. When she logs in, she can go to the financial section of her account. I would suggest you forbid her to click the YES button, on any loan offers. When my kids started college, I told them that if they click that button, even by mistake, then they're on their own and I'm not paying a penny for anything they need. Worked wonderfully for me. 🙂

[Carl]

Yes, if you qualify to claim her as your dependent. Your daughter MUST select the option for "I can be claimed on someone else's return", when you daughter does her own tax return.

If your daughter is:

Under the age of 19 on Dec 31 of the tax year, you qualify to claim her provided the other requirements are met.

Under the age of 24 on Dec 31 of the tax year, is enrolled at an accredited learning institution as a full time student for at least one semester that started in the tax year, you qualify to claim her.

Note that for both of the above, it does not matter how much she earned.

https://www.irs.gov/help-resources/tools-faqs/faqs-for-individuals/frequently-asked-tax-questions-an...

[tyfoltz]

GREAT! Thank you so much for the information! You have been very helpful.
We are new at doing our own taxes with TurboTax, just one more thing, she is now 17 as of DEC, she will be receiving her eligible refund as well correct? Sorry to sound ignorant to the whole tax world.

[Carl]

If your daughter has less than $6300 of taxable income in 2016, she will get all of it back. If more than that, then she will only pay taxes on the amount earned that is over $6300. But still, it's important that she select the option for "I can be claimed on someone else's tax return". If she does not select that, then you can't claim her and your return will be rejected by the IRS if you do.
I would suggest that you the parent e-file your tax return FIRST. Then wait until your return is accepted by the IRS before she e-files hers.
Also, is your daughter a senior in high school? If so, will she be attending college next year? I ask, because if so I have lots of information you'll find useful, concerning taxes and stuff on her college.

[tyfoltz]

she is actually a junior however she is graduating early, she will graduating in may this year. is their beneficial information for her at this point? she will be attending college in the fall?

[lmemberg]

My question was not answered.

I called twice.

I will stop using Turbo tax because of the bad customer serve.

Larry

[gloriah5200]

It depends on a lot of details.

You can claim her as a dependent as long as you can answer YES to these questions.

• Do they meet the age requirement? Your child must be under age 19 or, if a full-time student, under age 24. There is no age limit if your child is permanently and totally disabled.
• Do they live with you? Your child must live with you for more than half the year, Being away for school does not affect this.
• Do you financially support them? Your child may have a job, but that job cannot provide more than half of her support.( Income amount does not matter)
• Are you the only person claiming them? This requirement commonly applies to children of divorced parents. Here you must use the “tie breaker rules,” which are found in IRS Publication 501. These rules establish income, parentage and residency requirements for claiming a child.

Be sure she selects "someone else can claim her as a dependent" on her return when she files her own return.

Whether she is filing her own taxes for a refund or balance due is irrelevant unless she got married during the year and is filing a joint return with her spouse to get the full refund because of no tax liability.  That is when that characteristic comes into play.

[Carl]

@gloriah5200 just want to point out one thing. Even I tend to overlook this sometimes.

Do you financially support them?

For a college student under 24 that qualifies under the child dependent rules, there is no requirement for the parents to provide that student any support. Not one penny. The support requirement is on the student, and only the student.

The support requirement on the parents only comes into play under the Qualifying Relative Dependent rules.