Dependency and Credits

[stitch0991]

My daughter is a 21 year old college student.  She only had $544 of income.  I provide more than half of her support (nearly 100% of her support.)  My AGI is too high for any education credits on my return.  My AGI is also too high for the 2021 recovery rebate credit.  I am working on her return before finalizing my return and confirming whether or not I should claim her as a dependent.  It looks like there are no advantages to me not claiming her.  If I do not claim her then (1) she cannot claim the 2021 recovery rebate credit because even if I do not claim her, I CAN claim her as a dependent and the test is not whether she is claimed as a dependent but whether she CAN be claimed as a dependent.  So, even if I do not claim her she is not eligible for this credit.  (2) she is only eligible for the nonrefundable portion of the American Opportunity education credit because her earned income is less than half of her support.   Since she owes zero for federal income tax, a nonrefundable credit does not help her.  That also rules out any credit from the Lifetime Learning credit.

Am I correct in my analysis that there are no benefits to be not claiming  her as a dependent?  If I claim her as a dependent I will be eligible for the $500 credit for other dependents.  If my analysis is correct, she doesn't see any benefit on her return by me not claiming her as a dependent on my return.

[DanaB27 · Accepted solution]

Yes, you are correct with analysis. Since your daughter can be claimed as a dependent she would have to select on her return that she can be claimed and therefore she won't benefit if you do not claim her. 

Yes, you should get the $500 Credit for other dependents if you claim her.