Tax Planning for Graduating College Senior headed to Graduate School

[ClassicRockerDad]

You should check this out with the IRS but here’s an idea - If she has and will continue to live in her own apartment(s) and establishes legal residency there, then even if she is a full time student and you provide more than 50% of her support, you will not be able to claim her as a dependent for tax purposes because she doesn’t live with you.

That’s not the issue. I don’t want to claim her. I want her fellowship income to be taxed at her rates and not at my rates via the kiddie tax.

She can then claim herself as an exemption on her own tax return.

Only if she provides half of her own support

Remember that the portion of graduate school stipends that are not earmarked for tuition/fees count as taxable income. They would count as a means of support too.

Only the earned income parts. My understanding that a taxable fellowship such as NSF is not considered earned income and if she’s not independent will be subject to the kiddie tax.

As a practical matter, I really really doubt the IRS is going to audit a full-time graduate student to determine whether she is independent. They are usually far more worried about the reverse - i.e. parents inappropriately claiming an adult child as a dependent or the same person being claimed as an exemption on two different returns.

That’s hardly the point. Tax avoidance is good. Tax evasion is bad. This is true at any age.

So it looks like Stafford loans are capped at the cost of attendance after subtracting other aid. So this plan may be faulty.