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svargas24
New Member

Can I file as Head of Household?

My daughter moved to another state to go to college and got an apartment there, she receives my VA benefits for tuition and living expenses, she doesn't work and I pay for anything the VA won't cover.  Since her absence is due to school attendance, can I claim she lives with me?  Does it matter if she has gotten a driver's license in the state where she lives?
9 Replies
Carl
Level 15

Can I file as Head of Household?

Not quite right.
"My daughter moved to another state to go to college and got an apartment there"

The IRS says time spent away from your home for the purpose of attending school, is considered as time having lived with you. So you would indicate the student lived with you the entire year.

"she receives my VA benefits"

This does not count as support, for the student providing their own support. The students own support is based on income that the student physically earned during the tax year. The support requirement is on the student, not the parent. There is no requirement for the parent to provide any support - not one single penny.

The support requirement is on the student, and the IRS clearly identifies that scholarships/grants and other sources of income *DO* *NOT* *COUNT* as the student providing their own support. If the student does not provide more than 50% of their OWN support, then the parents qualify to claim them as a dependent on the parent's tax return. More detailed information follows below.

              • 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, 520/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.

KenH1
New Member

Can I file as Head of Household?

I'll defer to Carl.

KenH1
New Member

Can I file as Head of Household?

Deleted my original response.  See response from Carl above.
Carl
Level 15

Can I file as Head of Household?

No need to delete Ken. That's how we learn.  When there's two or more answers to a post, the one marked as recommended or with the most "was this helpful" votes, will be at the top.
KenH1
New Member

Can I file as Head of Household?

Thanks Carl.  To much reliance on the FAQs on my part
Carl
Level 15

Can I file as Head of Household?

Generally the FAQs are straight and to the point for a given situation. FAQs are not all inclusive, nor can they be expected to apply to every situation. Otherwise, they'd be books, not FAQs. 🙂
When posting a FAQ, I usually use it as a template and customize it if necessary, to that specific situation. Saves lots of typing time.
In cases where the FAQ does apply ver-batim, and there's no room for doubt, then I'll do as you did, and just past the answer link.
svargas24
New Member

Can I file as Head of Household?

Searching within TurboTax, the answer I get is: "For your dependent who is a college student, you say he lived with you all year.  Being away at school is considered a "temporary absence."  When would this apply?
svargas24
New Member

Can I file as Head of Household?

Carl, thank you so much for such a thorough answer, I just have one more question:  your chart shows "undergraduate" as a requirement for claiming a child as dependent, but TurboTax didn't ask me at any time my daughter's education level.  I also checked the IRS page and it didn't include undergraduate studies as part of the criteria for being considered a student.  Considering the circumstances identified in my original question, can I still claim my 23-year-old daughter who is in graduate school?
Carl
Level 15

Can I file as Head of Household?

In IRS Publication 970 the student must not have completed 4 years of college prior to Jan 1 of the tax year. If they have not, that student is an undergraduate. That's why TurboTax asks you the question, "Was (student) working on an associate, bachelor's or graduate degree?"
If you answered that question YES, then the student was an undergraduate on Jan 1 of the tax year.
I don't know what IRS page you read. but IRS Publication 970 (which is long) addresses the undergraduate requirement in numerous places. Also, my information above is directly from IRS Publication 970, and just re-worded to "plain English" so us common folk can make better sense of it. The important thing is, take the wording "literally".
Understand that Pub 970 does NOT cover the dependent qualifications. It's not what that publication is for. Dependency qualifications are covered on the IRS website (for the information you care about) at <a rel="nofollow" target="_blank" href="https://www.irs.gov/help-resources/tools-faqs/faqs-for-individuals/frequently-asked-tax-questions-an...>
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