Can my parents claim me as a dependent? I am a 22 year old full time college student who received around $10,000 in gross income (summer job + taxable scholarship money).

[sammx14]

thank you, I know this is a lot of information, but they actually don't pay any rent or mortgage payments on our home. They inherited it through family, and really only pay utilities on the house as their parents pay property taxes and home owners insurance. I was trying to take that into consideration when determining how much of my own support I provide, and believe I meet the threshold of over 50%. I'll try talking with my parents about it to save the headache of amendments, and will refer to the IRS publication overviewing the rules for claiming a dependent. thanks again!

[Hal_Al]

@sammx14  You don't really say how (source of money) you provide more than half your support, particularly the cost of schooling. Scholarships are not your own support.  Loans, co-sighed by the parent, are not your own support.  

The support value of the home, provided by the parent, is the fair market rental value of the home plus utilities & other expenses divided by the number of occupants. The ownership doesn't matter (unless it's you)

The IRS has a worksheet that can be used to help with the support calculation. See: http://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf

Yes, you will both be "audited". If someone else claimed you, as a dependent,  inappropriately, and if they file first, your return will be rejected if e-filed. You would then need to file a return on paper, claiming yourself, if appropriate (in your case it's the  parent that will have to file a paper return) The IRS will process your return and send you your refund, in the normal time. Shortly (up to a year) thereafter, you’ll receive a letter from the IRS, stating that your exemption was claimed on another return. It will tell you that if you made a mistake to file an amended return and if you didn't make a mistake to do nothing. The other party will get the same letter you did. If one of you doesn't file an amended return, unclaiming the exemption, the next letter, from the IRS, will require you to provide proof. Be sure to reply in a timely manner.

Winner gets the tax benefits; loser gets to pay the IRS back with penalties and interest.

[jenrysdam]

Hi. I have a question. So, I know you said that the student could make a million dollars and still be claimed by their parents, however, how would that pass the not paying more than 50% of their own living expenses? I only ask because, while my 19 year old daughter is a full time student, she also works full time. She made about $26,000 last year. She pays her own expenses, except for cell phone, auto insurance, and health care, which we pay. She pays her own $500 per month rent, her food, gas, and other expenses. Her schooling is paid for with grants and loans, but that's only about $8000 per year. How could I say that I pay more than 50% of her living expenses if I had to prove it?

Thanks,

Jennifer

[RaifH]

The determining factor is whether or not the child provided more than half of their own support in 2021. The comment that the child could make a million dollars and still be claimed by their parents meant that as long as their parents continued to support their child, it does not matter how much the child made.

In your case, it seems as if your daughter does pay more than half her own support, therefore you would not be able to claim her as a dependent on your tax return. The IRS provides a worksheet that you may find useful to determine if your daughter does provide more than half her own support. 

One argument you could make is that if she is renting from you, the fair market value of the housing you provide is much greater. Therefore, in essence, you are providing support for the difference between what the fair market value of the rental is and the amount she is paying. 

@jenrysdam

[Hal_Al]

Q.  How could I say that I pay more than 50% of her living expenses?

A.  You can't.  Clearly your daughter is providing more than half her own support and cannot be your dependent.

Q. What would be a situation where I could claim her?

A. She put her $26,000/year income into savings and investment. instead of spending it on living expenses.  Example: she lives at home and you provide all the room and board.  The incidental personal stuff she buys, for herself, adds up to less than half her support. 

[Club1820]

Came across your post.  we have our first child in college this past year, 2021 and not sure who should file the 1099-T.   Our details:   we are claiming him as a dependent.   He received a grant that also covers a bit of room & board, $4,668 in total covered for room & board for the 2021 Fall Semester.  But we also paid in Nov 21' $1,717 for the Spring 2022 Semester.    Are we able to deduct this additional amount we paid of $1,717 from the income amount of $4,668 from the grant for room & board?  Meaning his income amount would be $2,951 from the Grant?

Other details,  He earned from work in 2021 $8,645.   $8645+4668=13,313   He would have to file a return and we wouldn't use the 1099-T on our own return (parents)?     $8645+2,951 = $11,596  He WOULDN'T have to file a return and would we then be able to use the 1099-T on our own return (parents)?  

So essentially, can we deduct the payment in 2021 for 2022 spring semester from the grant award overage for room & board, thus putting him under the threshold for filing a return and allowing us to use the 1099-t on our own return?   Without the 1099-T on our return, we unfortunately would owe taxes on our return.  With the 1099-T our payment would be minimal.  Please advise  THANK YOU.

[MarilynG]

When you enter the 1098-T on your return (plus the $1717 that is not included on the 1098-T as 'Other Educational Expense'), TurboTax will tell you that there is Taxable Scholarship of $.... that the student needs to report on their return.

If this amount (plus his earnings) puts him under the threshold for required filing, he does not have to file.  However, if he had Federal Tax withheld on his income, he may want to file a return to get that refunded.  In that case, he would just add the 'Taxable Scholarship' amount to his return as follows:

• Click on Federal Taxes
• Locate Less Common Income and click Show more
• Locate and click to Start next to Miscellaneous Income, 1099-A, 1099-C
• Answer Yes to Did you receive any other wages?
• On the following screen you will locate Other reportable income and click Start
• Then you will enter SCH in the description box and the amount

@Club1820

[Club1820]

Thanks for the response.  Actually the $1,717 IS included in BOX 1 of the 1099-T.  So I guess I would include that amount since it was paid in 2021 and it would reduce the amount of the grant that goes towards room & board.  But after reading the description for Box 1, I am now even further confused.   It says " Box 1 Payments Received for qualified tuition and related expenses 40,258.00"   Does this mean everything qualifies as education expenses or only the "tuition" portion of the $40K paid?   Box 5 says "Box 5 Scholarships or Grants 34,823.00"  But only $30,155 is actually for "tuition".   So that is why I am not sure if the income for my son is the $34K Grant - the $30K tuition?  Or can I reduce that by the additional $1,717 that we paid for spring 22 that is included in Box 1 of $40K and paid in 2021?  And that would ultimately determine if he has to file a return since one puts him over the income level to file.   Also, turbo tax asks you specifically what amount the grant covered room and board on my return. so I need to know what to put here first before we do my son's return, if in fact we need to do one?   $4688 paid for room & board  (not including the $1717) or $2951 (including the $1717 payment for 2022 in 2021).

I hope this makes sense and THANK YOU for  you previous prompt response!

[jenrysdam]

One thing I found out when I called my daughter's college to question why their numbers didn't match mine, was that if you log into e-services on the college website you can download and print the form. That version vs. the one you get in the mail, has an itemized list of what is included in those numbers. That really helped me out a lot. Hope this helps.

[alyteddy]

Thank you both for great questions and valuable answers.  I appreciate the initiatives and well thought advices.  Cheers to both!

[RacinJason1]

Client's college student daughter meets all requirements of a dependent EXCEPT her Gross income was $5,200 in 2022.  This was far less than the 50% support test which the parent provided so the student can't claim the education credit on her return as she must file as a depended for another on her return.  Anyway to override Proseries if the 4400 gross income figure is not the determining factor, rather the 50% test rules per your post?

[DoninGA]

@RacinJason1 If the daughter is age 24 or older you cannot over-ride the tax code for the Qualifying Relative rules for a dependent when the income of the daughter is $4,400 or more in 2022.