<p>I played around with TurboTax and it seems that it is advantageous (by few hundred $) for my son to file as Independent.</p>
<p>Is it legal?</p>
<p>If I recall correctly, the form asks if your son can be claimed as a dependent on someone elses return – not if they are being claimed as a dependent. If you paid more than 50% of your son’s support, then my understanding is that he would need to check the box “can be claimed as a dependent,” whether or not you actually do claim him as a dependent.</p>
<p>If it’s bordeline, then you can probably do it. But if there’s no way he provided more than half of his own support, then no.</p>
<p>Remember that the American Opportunity Credit can be refundable on the parent’s return, but not on the student’s if he’s under 24. Does that make a difference?</p>
<p>Is that how it works? I always thought it was “can I claim so and so as a dependent?” I never thought it was required to claim an eligible dependent.</p>
<p>"Remember that the American Opportunity Credit can be refundable on the parent’s return, but not on the student’s if he’s under 24. Does that make a difference? "</p>
<p>You are correct. I get full $2,500. He gets only $2,450 in life time learning credit. The difference is that $400 of making work pay credit. Since I am retired we are in same tax bracket. So me getting extra exemption or him getting his own exemption is a wash.</p>
<p>And I also thought it was a ‘choice’ to claim some one as dependent or not.</p>
<p>simba - First of all, congrats on finding a way to save money by having your S file as independent. I’ve been looking at this for years and haven’t gotten close!</p>
<p>I believe “support” for a college student is a bit of a gray area. My D had a $25K merit scholarship, and her parents provided $24K of direct support (which means her room at home was counted as $0). Count the room and her parents provide the “bulk” of her support. Leave the room as part of an undivided house and she provided the bulk via the merit award.</p>
<p>YMMV.</p>
<p>^^My understanding is that scholarships do not count in the assessing whether the student provided more than 50% of their own support. Loans in a students own name do though.</p>
<p>A parent does not have to claim a qualified dependent child. But a qualified child cannot claim themselves if they can be claimed by the parent. </p>
<p>I agree with 3bm that if it is borderline you can go either way. My daughter worked, had work study, and had a loan one year and we figured we could really go either way. It was more beneficial for her to claim herself so we went that way. This year she only had a small amount of income so I don’t think (haven’t finished crunching numbers yet) we could verify it if we were asked to show she provided >50% of her own support. So we will probably claim her this year.</p>
<p>“^^My understanding is that scholarships do not count in the assessing whether the student provided more than 50% of their own support.”</p>
<p>Well, let’s agree to disagree here. My view is that it costs $49K each year the child attends college. In the case of a $25K merit award, is it really fair to assert that the college is providing the bulk of support for the student?</p>
<p>That said, I do agree with 3bm103 … as long as it’s close I believe you’re free to go with either. I don’t think a few hundred dollars difference (between the methods) is worth arguing about.</p>
<p>Couldn’t the parent gift $$ (up to allowable amt.) to the student so that the student then provided his/her own “support”? Not to further muddy the waters, but if two parents gift $26,000 (13K ea.) as permitted by IRS, this is outside of support, I think, and then student can use it however, and not be supported by parents (if other #s work out - as in New Hope’s example.)</p>
<p>Has anyone ever heard of IRS disallowing a student’s personal exemption if parents are not claiming as a dependent?</p>
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<p>I did not say the college was providing 50% of the students support. I said a scholarship does not count toward the student providing more than 50% of their own support. This is not my opinion but what the IRS rules. From IRS publication 501 page 14.
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<p>
I wondered about that too.</p>
<p>swimcatsmom: Does that publication say anything about Graduate student fellowship/stipend? I know it is taxable. I will have to know that answer next year.</p>
<p>It doesn’t mention graduate students specifically. The qualifying child rules (for claiming as a dependent) are relationship, age (under 19 or under 24 if a full time student), residency, support and joint return. Not sure how a stipend fits in there as far as the support rule - isn’t it treated as income rather than a scholarship? </p>
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<p>Simba:</p>
<p>My understanding is that a stipend is taxable income. However, we’ve calculated that S will not owe much if any tax since he only began receiving a stipend in September.
It might be hard for him and us to meet #4 unless we could claim that the money we spent on his college room and board and over the summer was more than the amount of his stipend Sept-Dec. We’ll have to look into it.
I’m not sure how a full-time student can meet #3. Can anyone?</p>
<p>^^ That’s covered by one of the gazillion ifs, ands, or buts</p>
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<p>Ah. So S can be considered to have lived with us. That’s #3. Thanks, swimcatsmom.</p>
<p>Now for #4.</p>
<p>marite: regarding # 3. A full time student under age 24 is considered living at home.</p>
<p>That I am certain.</p>
<p>I started with the idea that if he becomes independent we can save few hundred bucks. It does not look that way. </p>
<p>OK here is the next question…due to his graduate stipend we won’t meet # 4 in 2010. We will not be able to claim him as dependent. What happens to Medical Insurance? Currently he is latched on to us because he is a dependent student. In 2010 he will be still a student but will not be dependent on us.</p>
<p>I don’t know about TX, but I believe that in MA, S can be considered as our dependent until 26 as far as health insurance is concerned. S should be out of grad school and hopefully gainfully employed by then. </p>
<p>
[Mass</a> Health Care Reform - Dependent Eligibility : Open Enrollment : Woods Hole Oceanographic Institution (WHOI)](<a href=“Page Not Found - Woods Hole Oceanographic Institution”>Page Not Found - Woods Hole Oceanographic Institution)</p>
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If he has a $2,450 tax liability before the credit, then I not only believe he CAN claim himself, then I think he SHOULD. </p>
<p>To answer another question; I’ve never heard of the IRS disallowing a child to claim themselves, but there HAVE been instances where the child makes enough money that the IRS disallowed the parents from taking the dependent. I believe the cutoff was around $17,000.</p>
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Yes, the stipend is taxable to the extent it exceeds qualified tuition, fees and books. It is also considered earned income and therefore, he can take the standard deduction of $5,700 against it. Since he will also be claiming himself, then he also gets his own personal exemption. So he may not have to pay any tax, or very little.</p>
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I don’t know about your program, but my son’s graduate program gives them health insurance. Otherwise, you should look into buying them catastrophic only health insurance. It’s very reasonable at their age.</p>
<p>3bm:</p>
<p>There are two types of health insurance. One is through the university, which is mandatory and covers things such as emergency visits and vaccinations, and the second type, which is also mandatory unless a student can show that s/he is already covered through another insurance. This is where the parents’ own family insurance comes in. By being able to continue claiming S on our family plan, we were able to save him several hundred dollars. Every year, we have to fill out a form certifying that he is still a full time student in order for him to stay on our insurance plan; and we had to give details of our plan to his university in order for him not to have to pay for the second plan (the first is included in his stipend).</p>