Income for dependent

Forum|Forum|1 year ago
September 6, 2024
9 replies
60 views

Granddaughter is college student with a part time job. Also inherited an IRA worth about $50,000.

How much money can she take from the IRA and how much income can she make in 2024 and still be claimed on her parents' income tax?

thanks

Opus 17

Level 15

The question is, "does the child pay more than half her own support." If she does not, then she can be claimed as a dependent. You have to determine this for yourself based on your specific situation.

Her total support needs include tuition, room and board, medical care, travel, clothes, and entertainment.

Support she provides herself includes wages, student loans in her name (even if they are not in repayment, because they are a promise to pay) and money taken from investments to pay for living costs. Money that she spends on costs that are not her own support (such as, if she pays to support a child or boyfriend, or she invests the money) don't count as support she provides herself.

Support provided by others includes a pro-rated share of household expenses at her permanent address, plus whatever other people pay to help support her (tuition, medical, etc.). For example, if your granddaughter lives with you "full time" (even if she is temporarily away at college), and there are 3 people total in the house, her support that you provide includes 1/3 the total cost of maintaining your home (rent or mortgage, utilities, insurance, repairs and maintenance).

Scholarships are ignored in this equation, they don't count on either side of the ledger.

Note however, that if the child does not live in your home more than half the year, the rule is different. She can't be claimed if she has more than $4700 of taxable income for 2023, or $5050 for 2024. Children are usually considered to "live at home" while at college because college is considered a temporary absence. But some children may actually permanently move out and establish independent homes for themselves. So whether she is considered to live at home or live independently, determines which support and income test you use.

TAM2024Author

Level 2

Well, she lives on a college campus. Her parents are supplying all of her support. So you are saying that she can make as much income as she can and take money from her inherited IRA (no limit.). ?? Correct?

thanks so much !!

VolvoGirl

Level 15

And she might have a requirement to take withdrawals from the IRA of a certain amount or more. And to take it all out by 10 years. I’m not clear on how that works. Someone else will have to answer.

rjs

Level 15

Note that income is not the same as support. In the first case that Opus 17 outlined (she lives with her parents more than half the year, including time away at college), her income doesn't matter. What matters is the amount of her own support that she provides, not how much income she makes. If she takes the money from her job and puts it in the bank, or invests it, that is not money spent for support. She can make as much as she wants, and take as much as she wants out of the IRA, as long as she doesn't use it for more than half of her own support.