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

[xmasbaby0]

@jmcqueen 

IRS interview to help determine who can be claimed:

https://www.irs.gov/help/ita/who-can-i-claim-as-a-dependent

WHO CAN I CLAIM AS A DEPENDENT?

You can claim a child, relative, friend, fiance (etc.) as a dependent on your 2019 taxes as long as they meet the following requirements:

Qualifying child

• They are related to you.

• They cannot be claimed as a dependent by someone else.

• They are a U.S. citizen, resident alien, national, or a Canadian or   Mexican resident.

• They are not filing a joint return with their spouse.

• They are under the age of 19 (or 24 for full-time students).

• No age limit for permanently and totally disabled children

  •      They live with you for more than half the year (exceptions apply).

Qualifying relative

• They don't have to be related to you (despite the name).

• They cannot be claimed as a dependent by someone else.

• They are a U.S. citizen, resident alien, national, or a Canadian or Mexican resident.

• They are not filing a joint return with their spouse.

• They lived with you the entire year.

• They made less than $4200  (not counting Social Security)

• You provided more than half of their financial support. More info

When you add someone as a dependent, we'll ask a series of questions to make sure you can claim them.

Related Information:

• Does a dependent have to live with me?

• What does "financially support another person" mean?

• Can I claim a newborn baby?

[Carl]

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

No, no. no. The 529 distributions are not support from you. Doesn't matter if you are the custodian of the account either. It's still third party support.

So in short, when they say "support", it doesn't JUST mean food and shelter

Not even close.

 -Food

 - Housing (includes utilities)

 - Transportation
 - Entertainment

 - Education costs

 - Clothing

 - Personal hygiene

...and that's not all inclusive either. It's what I can recall off the top of my head.

[jmcqueen]

So you are saying that "support" can also include insurance and medical costs? Those are hefty, especially insurance, and I pay those. That would definitely put my daughter under the 50% support. 

In any case, she worked only 2.5 months this year, so her earned income is pretty small compared to the overall costs of her living expenses and grad school tuition, which started in the fall.

One confounding factor: she got the CARES unemployment compensation for a few months, and I have no idea how that counts on a Federal tax return. Does anyone know if that counts as income? It's still small, except for the CARES amount. 

[DoninGA]

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@jmcqueen wrote:

So you are saying that "support" can also include insurance and medical costs? Those are hefty, especially insurance, and I pay those. That would definitely put my daughter under the 50% support. 

In any case, she worked only 2.5 months this year, so her earned income is pretty small compared to the overall costs of her living expenses and grad school tuition, which started in the fall.

One confounding factor: she got the CARES unemployment compensation for a few months, and I have no idea how that counts on a Federal tax return. Does anyone know if that counts as income? It's still small, except for the CARES amount. 

---

Unemployment compensation is taxable income on a federal tax return.

Use this IRS worksheet for determining support - https://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf

To be a dependent under the Qualifying Child rules -

1. The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them.
2. The child must be (a) under age 19 at the end of the year, (b) under age 24 at the end of the year and a full-time student or (c) any age and permanently and totally disabled.
3. The child must have lived with you for more than half of the year. Temporary absences while away at college are considered living with you.
4. The child must not have provided more than half of his or her own support for the year.
5. If the child meets the rules to be a qualifying child of more than one person, you must be the person entitled to claim the child as a qualifying child.
6. The child must be a U.S. citizen or U.S., Canada or Mexico resident for some portion of the year.
7. The child must be younger than you unless disabled.

[macuser_22]

See IRS Worksheet 3-1. Worksheet for Determining Support
https://www.irs.gov/publications/p17#en_US_2019_publink1000171012

[Read2YourKids]

I'm working through the same scenario for my 22 year old daughter in GRADUATE school and have been reading through IRS codes, TurboTax help pages, and internet resources without finding a definitive answer (probably because the tax codes are so complex and not many distinguish between undergrads and grad school). I came across this explanation on the FAFSA website and found it very helpful.

https://www.fastweb.com/financial-aid/articles/does-dependency-status-on-income-tax-returns-affect-f...

Dependency status on IRS Form 1040 is specified by the Internal Revenue Code of 1986 [26 USC 152]. Dependency status on the FAFSA is specified by Section 480(d) of the Higher Education Act of 1965 [20 USC 1087vv(d)]. These laws are different and have different definitions of the term dependent, although there are some similarities.

Chapter 3 of IRS Publication 17 describes the criteria for a child to be considered a dependent on the parent's income tax return. Generally, a child must be under age 19 or a full-time student for at least 5 months during the year to be considered a dependent for federal income tax purposes. The child must have lived with the taxpayer for more than half the year, notwithstanding any temporary absences for illness, education, business, vacation or military service. The child must not have provided more than half of his or her own support. (Note that scholarships do not count when determining how much support was provided by the child.) Multiple support agreements allow divorced parents to decide which parent can claim the child as a dependent.

To be considered a dependent for federal student aid purposes, the child must not be an independent student. A graduate student is automatically considered an independent student. (A student will also be considered independent if he or she is over age 24 as of December 31 of the award year, is married, has dependents other than a spouse, is a veteran or on active duty in the Armed Forces, or is an orphan or satisfies certain other criteria.) If a child is not an independent student, the parent must also have provided more than half of the child's support. The definition of support for the FAFSA differs slightly than the definition used by the IRS. The child does not have to live with the parent to be considered a dependent on the FAFSA.

Thus a graduate student may be claimed as a dependent on the parent's federal income tax return if the student satisfies the IRS rules for a qualifying child without affecting the student's status as an independent student for federal student aid purposes. The graduate student is independent on the FAFSA because she's a graduate student, regardless of whether the parent supports her or not.

Likewise, whether the child was a dependent student for part of the year and an independent student for the rest of the year has no impact on whether the parent can claim the child as an exemption on the parent's federal income tax returns. It is irrelevant. The dependency status for federal student aid purposes and the dependency status for federal income tax purposes are separate, unrelated concepts. Note that if a parent claims a graduate student as a dependent on the parent's federal income tax returns, it may affect the student's ability to claim certain tax benefits on her own federal income tax return. For example, students who are claimed as an exemption on someone else's federal income tax return are not eligible for the student loan interest deduction.

[xmasbaby0]

@Read2YourKids  If your daughter is a full-time student the fact that she is in grad school has nothing to do with it.  She is a student and she is under the age of 24.  Nothing in the tax laws says the student has to be an undergraduate in order for a parent to claim the child.   The rule is if she CAN be claimed as a dependent, she must say so on her own return if she is filing one.  It is not a choice based on what education credits she can get if she does not file the return correctly.  She does not have to live with you--living away at school is considered a temporary absence and you can still say she lived with you on your own return.

And...there is no such thing as being a dependent for part of the tax year.  She was either a dependent or she was not a dependent.  Read the criteria below and use the IRS tool to determine if she can be claimed.  If you can claim her then YOU are the one who gets to enter the education credits on your own tax return.  A dependent cannot claim education credits.  If she is in grad school she (or you) cannot get the American Opportunity credit.  But she might qualify you for the Tuition and Fees credit or Lifetime Learning credit.

IRS interview to help determine who can be claimed:

https://www.irs.gov/help/ita/who-can-i-claim-as-a-dependent

WHO CAN I CLAIM AS A DEPENDENT?

You can claim a child, relative, friend, fiance (etc.) as a dependent on your 2019 taxes as long as they meet the following requirements:

Qualifying child

• They are related to you.

• They cannot be claimed as a dependent by someone else.

• They are a U.S. citizen, resident alien, national, or a Canadian or   Mexican resident.

• They are not filing a joint return with their spouse.

• They are under the age of 19 (or 24 for full-time students).

• No age limit for permanently and totally disabled children

  •      They live with you for more than half the year (exceptions apply).

Qualifying relative

• They don't have to be related to you (despite the name).

• They cannot be claimed as a dependent by someone else.

• They are a U.S. citizen, resident alien, national, or a Canadian or Mexican resident.

• They are not filing a joint return with their spouse.

• They lived with you the entire year.

• They made less than $4300  (not counting Social Security)

• You provided more than half of their financial support. More info

When you add someone as a dependent, we'll ask a series of questions to make sure you can claim them.

Related Information:

• Does a dependent have to live with me?

• What does "financially support another person" mean?

• Can I claim a newborn baby?

https://ttlc.intuit.com/questions/1901487-what-is-the-tuition-and-fees-deduction

https://ttlc.intuit.com/questions/3262984-who-is-eligible-for-the-lifetime-learning-credit

https://ttlc.intuit.com/questions/1901172-what-education-tax-credits-are-available      

https://www.irs.gov/help/ita/am-i-eligible-to-claim-an-education-credit

[Hal_Al]

In taxes, the only time grad student vs undergrad status matters is in claiming the more generous American Opportunity Tax (Tuition) Credit  (AOTC).    Grad students are not eligible for it.  

[JD124B]

Hello - 23 yr old son completed undergrad in Dec 2019 and lived in another state away from me from Jan 2020 thru starting dental school in July 2020. Worked for a few months before laid off from job. I paid first semester tuition and rent. I can see both ways on dependency - his income was around $4500. 

[Hal_Al]

@JD124B  There are two types of dependents, "Qualifying Children"(QC) and standard ("Qualifying Relative" in IRS parlance even though they don't have to actually be related). There is no income limit for a QC but there is an age limit, student status, a relationship test and residence test.  See full rules above.

Your son cannot be your Qualifying Child because he did not live with you for more than half the year.  He cannot be your Qualifying Relative because his income was over $4300. 

[angelabete]

Assuming she was a 23 year old graduate student by Dec. 31, would the result be different? My emphasis here is not only on age 23 but on the graduate school. thanks! 

[angelabete]

Another user responded to a similar question back in December 2020 (see above). No need for additional answers, thanks 🙂

[Vanessa A]

If she is 23 and a Full-time student you can claim your child even if she is a graduate student.  If she is 24 and getting a bachelor's degree, you cannot claim her.  It is not about graduate school or undergraduate school, it is about the age. 

Being in graduate school would affect the ability to claim the American Opportunity Tax Credit...you wouldn't be able to...but you could still claim the Lifetime Learning Credit. 

[angelabete]

Thanks Vanessa A! understood,