Grad student sibling's impact on undergrad's EFC

WayOutWestMom
Fri, 25 Mar 2011 15:35:24 +0000

For a grad student to be considered a tax dependent, the parent(s) must provide for more than 50% of their material support.

Material support can include rent paid in their behalf, a grocery allowance, any insurance coverage paid on their behalf. Basically any necessary living expenses. A car is not a necessary living expense.

A car, esp. if it’s registered in their name, will generally be considered a one-time gift by the IRS and not material support.

You do need to keep track of all the expenses and do a rough calculation to see who is contributing more to the grad student’s maintenance.

But here’s the kicker—tuition is material support and if the grad student is getting a TA, RA or Fellowship then you must consider both any stipend (or salary) the grad student is getting from the school plus the value of any tuition remission they receive when calculating how much support the student is providing for herself.

I had to do this calculation regarding D1 for a couple of years and this is the advice I got from my accountant.

It sounds like that your younger child’s college will allow you to list your grad student as a dependent on the younger child’s FAFSA if the grad student is a dependent for tax purposes.

Your grad student will independent on her own FAFSA whether or not you declare her as an dependent on your taxes. FAFSA dependent status is not the same as tax dependent status.

BTW, if you do declare your grad student as dependent on your tax return, then your grad student cannot clain she is an independent on her own tax return and will lose her ability to use the higher deduction for an independent. (IOW, her non-taxable earnings will get capped at $5800/year isntead of the higher allowance a single person is allowed.)