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My daughter is in her last year of graduate school. Can I still claim her as a dependent?

I am a co-signer on her student loan and supply more than half of her income.
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28 Replies
Carl
Level 15

My daughter is in her last year of graduate school. Can I still claim her as a dependent?

IF you qualify to claim her, then yes. Understand that there is no requirement for the parent to provide any support - not one dime. The support requirement is on the student. (I am assuming she was an undergraduate in 2015). There is also no income limit for the student either. The below pretty much clarifies everything.

              • 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 at least a half 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.

 

My daughter is in her last year of graduate school. Can I still claim her as a dependent?

Thank you for your detailed answer.  My daughter is actually in graduate school though.  Since she is still a full time student, do the same rules apply?  She was 24 at the end of 2015.
Carl
Level 15

My daughter is in her last year of graduate school. Can I still claim her as a dependent?

If she was 24 on Dec 31, then that nixes it. Things fall under the qualifying relative rule where you have to provide more than 50% of her support. But if she earned over $4000 in 2015, you can't claim her at all. As indicated in the attached chart, she will file her own tax return and she will report the education expenses .
jennaure
New Member

My daughter is in her last year of graduate school. Can I still claim her as a dependent?

Very helpful answer! I would like to view the chart you say would be attached at the bottom but I can't locate it...

Carl
Level 15

My daughter is in her last year of graduate school. Can I still claim her as a dependent?

You responded to my post from 6 months ago. It's just by absolute pure luck I came across it. Chart attached.

 

My daughter is in her last year of graduate school. Can I still claim her as a dependent?

@Carl Actually, your original post was from about 5 years ago.  You mention 2015 in the original post.  Way to go...!!

My daughter is in her last year of graduate school. Can I still claim her as a dependent?

Same question but:

 

- 22 year old child is in graduate school pretty much year-round (trimesters)

- In addition to my support of him, he has secured various student loans to cover tuition, some living expenses, etc.  I realize that scholarships and grants do not count as providing their own support but how about these student loans?  If they do count, I presume that my support of him needs to exceed these loan amounts?

 

 

Carl
Level 15

My daughter is in her last year of graduate school. Can I still claim her as a dependent?

@djarvis88 parent' support doesn't matter. There is no requirement for the parent to provide the student any support. Not one penny. The support requirement is on the student, and *only* the student.

 "If the student did *not* provide more than 50% of the student's own support, then the parent's qualify to claim the student as a dependent on the parent's tax return".

There are only two possible ways the student can provide more than their own support, Yet it is still possible that even with both ways, the student can not possibly justify a claim to providing more than half of their own support.  This is because of that little thing the IRS refers to as "reasonable" costs.

If the student:

 - has a W-2 job or is self-employed and earned sufficient amount (in the same tax year) that is in excess of all third party support received, to justify a claim to providing more than half of their own support.

 - The student is the *PRIMARY* borrower on a *qualified* student loan, and sufficient funds were distributed during the tax year that are in excess of all third party support, to justify the student's claim of providing more than half of their own support.

Even with both or either of the above, it's possible for the student to have earned a million dollars, yet still not be able to justify providing more than half of their own support. For example (this is an exagerated example) if the student has $80,000 in third party support (scholarships, grants, 529 distributions, money from Mom & Dad, Gift from Aunt Mary, etc.) that would mean the student would need to have earned at least $80,001 to justify a claim of providing more than half. However, if an undergraduate claims that it cost them more than $160,000 (including tuition) to support themselves for a year, be ready for an audit. The IRS is not going to go for that. Particularly for a single undergraduate under the age of 24.

In other words, renting a $5000/mo penthouse suite isn't going to fly, as the IRS will not in any way, see that as "reasonable" for an undergrad. Claiming $1000/mo for food won't fly either. So steak and lobster for lunch and dinner 7 days a week, with steak and eggs for breakfast isn't gonna cut it with the IRS. It's just not "reasonable".  Likewise, that 7-day cruise they went on during spring break may be considered an unreasonable entertainment expense for an undergraduate too. But then, there've been some really good deals that time of year targeted specifically at college students too.

 

My daughter is in her last year of graduate school. Can I still claim her as a dependent?

@Carl Cool, thanks for the quick and detailed response!

 

I think in our case this:

 

The student is the *PRIMARY* borrower on a *qualified* student loan, and sufficient funds were distributed during the tax year that are in excess of all third party support, to justify the student's claim of providing more than half of their own support.

 

holds true.  He's secured student loans in his own name that I am pretty sure exceed the amount I gave him through his 529.

 

So in short, when they say "support", it doesn't JUST mean food and shelter so that one doesn't starve and die, it also means the amounts involved to actually be able to attend grad school.

 

I do not think I can claim him as a dependent.

Carl
Level 15

My daughter is in her last year of graduate school. Can I still claim her as a dependent?

Basically, "support" is the following things paid for with the student's earned income or the student's borrowed money:

Education (tuition, books, lab fees)

Housing

Food

Utilities

Transportation

Entertainment

One problem with this is that if the student doesn't have "earned" income or very little earned income and expenses were paid primarily with borrowed money, the related education deductions and credits the student may qualify for will be extremely limited or non-existent. That's because the deductions and credits are based on "EARNED" income. In such a case it's always better for the family as a whole, for the parent's to claim the student and the related education stuff if they qualify.

Remember, determining who claims the student as a dependent is completely unrelated to determining who qualifies to claim the education expenses. They are two completely different and separate determinations.

 

 

 

Carl
Level 15

My daughter is in her last year of graduate school. Can I still claim her as a dependent?

I am pretty sure exceed the amount I gave him through his 529.

For tax purposes, the IRS doesn't see "you" as giving him anything through a 529. That 529 is considered it's own "third party source" of income for the student, having nothing to do with you. Just because you may be the custodian of the account doesn't matter either. That 529 money is *not* from you.

Money you give the student out of your pocket is also "third party support". Remember, the parent is not required to provide the student any support what-so-ever. So the IRS considers money you provide/give the student to also be "third party support".

The support requirement is on the student, and only the student.

 

 

My daughter is in her last year of graduate school. Can I still claim her as a dependent?

Ok so it does sound like "support" does include school expenses, in which case I am fairly confident that I cannot claim him.

 

I was just wondering because an analogy might be that instead of choosing to apply and receive $50k in loans to go to college, he could just as well CHOOSE to apply and receive $50k in personal loans and travel the world instead.  He'd likewise be "supporting himself" because he needs food, clothing, shelter, as he travels.  But one seems to warp the definition of "support" while the latter falls within the realm of acceptability.

 

And yes, that is indeed the problem- his returns won't realize the various education deductions/credits like mine would.  But I thought that I could only claim the various education credits if he was a dependent?

My daughter is in her last year of graduate school. Can I still claim her as a dependent?

<<For tax purposes, the IRS doesn't see "you" as giving him anything through a 529. That 529 is considered it's own "third party source" of income for the student, having nothing to do with you.>>

 

Yes, understood.  The fact that his own secured loans far overshadow any and all 3rd party support is what matters.

jmcqueen
New Member

My daughter is in her last year of graduate school. Can I still claim her as a dependent?

I'm trying to figure out if I can claim my daughter, probably for the last time. She is 23, won't be 24 until next year. She started grad school in late August. She worked for 2.5 months in Pa (I live in DC) in the beginning of this year, then was home. We kept her apartment because we knew she would go back to school in the fall, but she was home this year for exactly 6 months. I pay for her medical bills, insurance, phone, internet at her grad school apartment, some of her rent (she pays for some, and buys most of her food). I paid the cash portion of her tuition, but she got a school loan for 20K. I will pay that when it comes due. I think I can reasonably say that I pay 50% of her expenses, all things considered, but I want to make sure that I get it right. 

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