My main concern is, should I let my mom claim me as a dependent?

[tameshaharvey10]

Hi, I am 19 and currently enrolled in college full time. I need help preparing to file taxes this year! I want to maximize my return as much as possible, so should I claim dependent and able to be claimed by my mom? I worked during the summer and I also hold a work study position throughout the academic year. I live with another relative during the summer and on campus during the school year. How can I receive my max. return amount? How should I file? 

[TaxGuyBill]

So you don't have a choice in the matter, it depends on what Tax Law dictates for your specific circumstances.

As a full-time student under age 24, you can NOT claim your own exemption UNLESS (1) You paid for over 50% of all of your support *OR* (2) You have PERMANENTLY moved out of your parents home.  If either of those are true, then your mom can not claim you.

[tameshaharvey10]

Okay, Thank you a ton!

[Hal_Al]

" I live with another relative during the summer"
You may actually be the "qualifying child"* dependent of that relative, rather than your parent.

There is a rule that says IF somebody else CAN claim you as a dependent, you are not allowed to claim your own exemption. If you have sufficient income (usually more than $6350), you can & should still file taxes; you just doesn’t get your own $4050 exemption (deduction). In TurboTax, you indicate that somebody else can claim you as a dependent, at the personal information section.  
Even if you had less, you are allowed to file if you need to get back income tax withholding. You cannot get back social security or Medicare tax withholding.

There's a new urban myth among college students that says they can get a $1000 from the government just for filing a tax form. For most of them, they simply aren't eligible. A student, under age 24, is only eligible for the refundable portion of the American Opportunity Credit if he supports himself by working. You cannot be supporting yourself on parental support, 529 plans or student loans & grants. You must have actually paid tuition, not had it paid by scholarships & grants.  It is usually best if the parent (or your "other relative") claims that credit.  
You cannot claim a credit if you are, or can be, claimed as a dependent by someone else.


*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, a relationship test and residence test. Only a QC qualifies a taxpayer for the Earned Income Credit and the Child Tax Credit. They are interrelated but the rules are different for each.

[Carl]

Understand that $6350 figure Hal-Al quoted above too. That's just the limit of which if you exceed, you may be required to file a tax return. It has nothing to do with the self-exemption issue. For a full time college student under the age of 24 on Dec 31 of the tax year, when it comes to exemptions and the such, the student's earnings do not matter. The student could earn a million dollars and still qualify to be claimed on the parent's tax return.
It's also important to understand what is and is not included in the "support" requirement. Spending money on a Caribbean cruise during the summer break, or buying a $40,000 new car is not providing your own support, any way you look at it. Self-support expenses must be reasonable and necessary.

[Carl · Accepted solution]

As a full time college student at 19 years old, *you* don't have any choices here. Only your parents do. You have to select based on the criteria as clarified by the IRS. Most likely, you have to select "I can be claimed on someone else's tax return". Weather your mom claims you are not, flat out doesn't matter either.

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 a full 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.

1099-Q Funds

 First, scholarships & grants are applied to qualified education expenses. The only qualified expenses for scholarships and grants are tuition, books, and lab fees. that's it. If there is any excess, then it's taxable income. It automatically gets transferred as follows depending on what type of 1040 you’re riling.

1040-EZ excess scholarship income is included on line 1.
1040-A excess scholarship is included on line 7.
1040 Excess scholarhip is included on line 7.

Next, 529/Coverdell funds reported on 1099-Q are applied to qualified education expenses. The qualified expenses for 1099-Q funds are tuition, books, lab fees, AND room & board. That's it. If there are any excess 1099-Q funds they are taxable. The amount is transferred as indicated above with one exception. For the 1040 excess ESA/QTP funds get transferred to line 21 with the annotation “SCH” next to it.

Finally, out of pocket money is applied to qualified education expenses. The only qualified expenses for out of pocket money is tuition, books, and lab fees. Room & board is NOT a qualified expense for out of pocket money.

When you have a 1099-Q it is extremely important that you work through the education section of the program in the order it is designed and intended to be used. If you do not, then there is a high probability that you will not be asked for room & board expenses, and you could therefore be TAXED on your 1099-Q funds.

Finally, if "all" qualified expenses are covered by scholarships, grants, 1099-Q funds and there is ANY of those funds left over, the left over excess is taxable. While the parent can still claim the student as a dependent, it is the student who will report all the education stuff on the student's tax return. That's because the STUDENT pays the taxes on any excess scholarships, grants and 1099-Q funds.

[tameshaharvey10]

Gotcha, Thank you!

[Erin03]

Hi Hal_Al,

I hope you're still active on this site!

Last year you helped me with my kids and my tax returns related to their 1098-T and 1099-Q.  You told me to put in $4000 for each child under Tuition only on the 1098-T to get the full $2500 education credit, which I did.  This year it is resulting in only $1065 education credit per child.  I can't figure out why or what I did wrong.  Could it be because my taxable income is significantly lower this year?

Also, TT has changed it's format somewhat this year and I no longer see the question as to "how much scholarship money you spent for room and board." so I couldn't input the scholarship amount my kids received in that spot like you told me last year.  

Thank you so much,

Erin