<p>That seems like a fair and reasonable way to do it, GTalum. That way everyone is happy, though it sounds like you were completely in the right to do it the way you did. </p>
<p>I know what you mean, barnardmom. I laughed when I read about how a child had to be younger than me, though.mine sometimes have such an attitude about how I know NOTHING and they need to teach me, I feel like I’m younger than them!</p>
<p>I did not claim my d. as a dependent the year that she graduated. I really didn’t do the math – but she graduated in May, had a full time job in June, and was supporting herself + paying her own rent from then on. Also, I never subsidized her food costs or other living expenses – I was just paying tuition & room costs. She had a Pell grant her senior year, so I’m thinking that whatever I paid the school for that final semester would probably have been less than what she paid to support herself while living on her own in NYC for the remaining 7 months… but I really didn’t ask or bother to do the math. I mean, I’m not too worried that IRS will ever show up at my doorstep asking for an accounting – I’m sure they have better things to do than audit the tax returns of recent college grads. IRS gets their $$ either way. It was just easier for me to take the view that if I supported the kid for 5 months and she supported herself for 7, living away from home – then she was supporting herself the majority of the time. </p>
<p>I might have made a different decision if the kid had moved home or needed financial help from me before finding a job — my son quit college at age 20, got a job in July or August but did not move out until October – and I remember I did claim my son as a dependent that year though of course not the following year. </p>
<p>Anyway, I think you are right that you have some leeway in these situations. Yes, IRS has very explicit rules… but it’s a little more fuzzy to define what “support” means, and you can argue either way on some points. I mean… I certainly wouldn’t include the fair market rental value of a room in my home for 5 months while my kid was living in NYC, no matter what the IRS worksheet says – that just doesn’t make much sense. </p>
<p>Of course, I’m talking about a daughter. I see a line item on the IRS worksheet that says, “total clothing expenses”. If I had factored in what my daughter probably paid for new shoes… that probably shifts the balance in her favor right there. ;)</p>
<p>Whoops, I meant to say he left in June and I initially thought I could not claim him looking at the residency requirements. Fortunately, annoyingdad pointed out that the residency requirements seem more relaxed for temporary jobs. </p>
<p>“Of course, I’m talking about a daughter. I see a line item on the IRS worksheet that says, “total clothing expenses”. If I had factored in what my daughter probably paid for new shoes… that probably shifts the balance in her favor right there.”</p>
<p>Funny. I’m sure parents of daughters can commiserate. And the silliness of including the fair rental value of a portion of your house while your kid is living all the way across the country is ridiculous. Can’t imagine who comes up with this stuff anyways.</p>
<p>We can’t claim exemption or tax credits anyway so we haven’t claimed our older D in a while. </p>
<p>D has claimed small amount of AOTC for 2011 and 2013 to get her summer withholding reimbursed. Probably will be the full $2500 for 2014. </p>
<p>She graduates and starts full-time work in July and has a well-paying job. She plans to live at home rent-free for a while. There is no point in charging her rent because that will just be income to us anyway. </p>
<p>We’re trying to figure out if there is a way to make it so that she claims more than 1/2 of her own support so she can claim her own exemption for 2014. Her tuition was paid for with a 529, but all of her other expenses like rent and utilities have been paid for by her. She does have our credit card which she uses for groceries and necessities. She’s applied for her own credit card - she probably should have done that before the start of the year. </p>
<p>I think that the largest factor on which way it goes depends on whether the IRS rules one way or the other whether qualified educational expenses paid through a 529 owned by the parent with the child as beneficiary is considered support. I have asked for tax advice on this subject and scoured the web, but it’s clear that it can be argued both ways and the IRS has not seen fit to clarify. Since we had to file a gift tax return in 2010 when we funded the 529, one could argue that is hers. Since we control the funds and had the option to take it back or change the beneficiary, one could argue that it is considered ours. </p>
<p>This ambiguity did not impact our or her 2013 taxes but will be crucial in 2014. </p>
<p>A good discussion is here
<a href=“The Impact of 529 Plans on Claiming a Dependent”>http://www.savingforcollege.com/articles/the-impact-of-529-plans-on-claiming-a-dependent</a></p>
<p>@busdriver,
So glad to hear you are an October filer and I’m not the only egregious procrastinator…</p>
<p>Yes, delay the misery, GMT! My accountant says there is less chance to get audited if you extend, so procrastination works well.</p>
<p>Wish we had this issue. Since we pay 100% for D, she is our exemption. Oh well, it’s cheaper than also paying tuition! ;)</p>
<p>Shoot, I think just about anything is cheaper than paying tuition! Except for taxes and mortgage, I guess.</p>
<p>@ClassicRockerDad
</p>
<p>Then do whichever you prefer! </p>
<p>If she files a return in 2015 based on 6 months of income from a well-paying job and claims herself as an exemption, it isn’t going to raise any red flags for IRS. I’m assuming “well-paying” means well above minimum wage – so her 6 months of income will probably be more than many low-wage earners get in a year. </p>
<p>IRS sends out letters questioning returns when there is a mis-match of data that they receive. The typical situation where the exemption issue would come up would be if the parents try to claim the recent grad as a dependent the same year that the student files and takes an exemption. That probably happens way too often – and that is probably the situation when all those rules come into play. Mom & Dad claim Junior as a dependent; Junior files as independent – the IRS computer chokes when two separate returns show up with an exemption tied to the same social security number. See <a href=“How the IRS Audits Tax Returns Claiming Dependents”>http://taxes.about.com/od/dependents/qt/Dependents-Audits.htm</a> for an explanation of what happens next. </p>
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<p>As long as you and your kid have a clear understanding and stick to it, there is not going to be a problem. All of those rules are set out for situations where there is a dispute – so that long list of expenses the parent can rely on is for the situation where there is a double claim and the parents are defending a tax audit. </p>
<p>As long as the exemption is only claimed on a single return, it will never come to the IRS’s attention.</p>
<p>I’m not advocating that anybody wilfully disregard rules, but we are all talking about iffy. transitional situations – kids who start supporting themselves mid-year. </p>
<p>If you have to ask because you are unsure, then you are going to be in a situation where you are ok either way, as long as you let your kid know if you decide that you want to claim him/her as a dependent one last time. </p>
<p>That used to happen. Now with electronic filing, the first return to be filed gets accepted regardless of whether they are entitled to the exemption or not. Then the second return gets rejected. Happens every year. Sometimes it’s not even the graduate student, but a kid filing for the first time isn’t aware of how it works, claims themselves, even if it doesn’t help and then the parent’s return gets rejected. In this case, either the parents then file without the child then send in both amendments together, or they wait for the child to amend and then file.</p>