She will only receive about $600 less if you claim her as a dependent. But you should receive much more than that*.
But, it's not optional. You don't get to decide which way is best for either of you. She either qualifies as your dependent or she doesn't. There is a rule that says IF somebody else CAN claim him as a dependent, he is not allowed to claim his own exemption. If he has sufficient income (usually more than $6300), he can & should still file taxes; he just doesn’t get his own $4050 exemption (deduction). In TurboTax, he indicates that somebody else can claim him as a dependent, at the personal information section.
A child of a taxpayer can still be a “Qualifying Child” (QC) dependent, regardless of his/her income, if:
1. He is under age 19, or under 24 if a full time student for at least 5 months of the year, or is totally & permanently disabled
2. He did not provide more than 1/2 his own support. Scholarships are considered third party support and not as support provided by the student.
3. He lived with the parent (including temporary absences such as away at school) for more than half the year
So, it doesn't matter how much he earned. What matters is how much he spent on support. Money he put into savings does not count as support he spent on him self.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.
*There are too many variables such as the type of income, your exemptions, filing status, credits, withholding etc., to to give more than a rough guess. To preview the federal tax result, for each of you, you can use this tool to do alternate returns for each of you to compare.
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