Worksheet for determining support - What should be included in line 1 & 7?

[Question4]

I'm trying to determine if I could claim my partner as a dependent and have a question about line 1 on the IRS worksheet which states:

Enter the total funds belonging to the person you supported, including income received (taxable and nontaxable) and amounts borrowed during the year, plus the amount in savings and other accounts at the beginning of the year. Don't include funds provided by the state; include those amounts on line 23 instead 

1) Do I exclude the "state need grant" here from his financial aid or include it still since it's all part of his "grants and scholarships" (since the 1098-T doesn't separate these amounts in box 5 although it does in the section only provided to me -- He received federal pell grant, state need grant, and other tuition exemptions).  

2) Do I include money I sent him or anything his parents sent him since it says to list even the nontaxable income  (or do allowances not count as income of any sort)?

And I was also wondering, for line 7, would that be all of our meals, groceries, etc.? I didn't keep a separate log but went back to view my bank statements to calculate the total. I didn't include any amounts paid with cash or debit (which I can't track) or meals I had alone (which I know because they're less than $15 - I filtered any amounts less than that just to be on the safe side). Does this sound correct?

Thank you very much!

[DianeW · Accepted solution]

The answers to your questions are shown below.  I've also included the rules for a Qualifying Relative, which must all be met to claim another person who may or may not be related to you.

1. If the scholarships and/or grants are not taxable to the potential dependent they are not counted as funds provide for support. They do have to be counted if they are taxable, in which case they would be funds provided from the dependent's own sources.  And if a scholarship or grant is for a nonchild, for purposes of the support test, the scholarship exclusion does not apply to a nonchild.  This means that in your case, because this person will only meet the Qualifying Relative dependent rules, you must include the scholarships as part of the support provided by the child.  It cannot be ignored.
2. The money provided by you is not income provided by the dependent, and is not considered nontaxable income of the dependent.  These are funds you provided for support.  Likewise, money provided to the dependent by the parents is considered support provided by a third party.
3. Expenses for the entire household are entered in this section, then they will be divided by the number of people living there to determine the dependent's share.  It is correct to add all household expenses for the year.

Qualifying Relative:

• You provided more than half of their support.

• They made less than $4,050 in gross taxable income. (Social Security income generally doesn’t count here.)

• They live with you (365 days in the year) or they are related to you.

• They aren’t a dependent on someone else’s taxes.

• They aren’t doing their taxes with a spouse (married filing jointly).

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

  You can’t claim a dependent if you are a dependent on someone else’s taxes.  Use the link here for more information.  Rules for Claiming a Dependent on Your Tax Return

[Edited: 02.06.2018 | 5:17 AM]

[Question4]

Thank you for the clarification!  I've been getting split answers regarding #1 and I was wondering if providing more detail would change anything:


I was recently informed that since he's not a qualifying child on my return (or anyone else's), I would have to account for ALL of his grants/scholarships regardless.  I was initially told that I only have to account for the excess after paying qualifying education expenses, which would count as his income -- Do you know which is true?  I'm so lost...

I really appreciate your help and guidance.  Taxes are so confusing and the more I ask, the more there is to consider/research but I just want to make sure I file them correctly.

[DianeW]

@Question Please see the updated information in 1. above.  The grants will be included when determining support because this is not your child. Also, to be clear, this person does not qualify to be a child on your tax return, which is why I added the Qualifying Relative rules.

[Question4]

Thanks that makes sense!

So would I treat all of his grants the same and report the entire amount under line 1 on the IRS worksheet for determining support?  I think the part that confused me also about this was the "funds provided by state" as part of the financial aid he received from submitting FAFSA was the "state need grant" and I'm not exactly sure what that should be treated as.

[DianeW]

@Question Yes, but remember to enter the education expenses as part of the support costs as well.