<p>Our daughter, age 22, has started a Ph.D. program. We are trying to understand her relationship as “dependent” with respect to (1) taxes; (2) health insurance; and how all that relates to in-state residency. Some facts:</p>
<ol>
<li><p>She is at a state university (not in our home state); she receives tuition + “participant stipend” (not “compensation for employment” according to the U): she needs to establish residency by the beginning of her second year (next August, 2010). So far she has (1) signed a lease for an apartment; (2) licensed a car; (3) applied for a new drivers’ license and registered to vote. By next fall, she’ll have 12 months of utility bills too. I assume this will qualify her as an instate resident?</p></li>
<li><p>According to our health insurance she is covered until she is 25, as long as she isn’t married and is a full-time student. So far, so good. This would make her our dependent, at least for insurance. Does this have any affect on her in-state resident status?</p></li>
<li><p>For taxes: she graduated college in May 2009; lived at home this summer. So for 9 mos, we provided her support in one way or another. Now, this fall, she is pretty much on her own, although we help out a bit. Do we still claim her as a dependent this year? Does she claim herself? Does any of this affect #1 or #2 above</p></li>
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<p>Our daughter had the same situation and started grad school in fall 2008 and she was our dependant until then. However, we did not claim her as a dependant for 2008, doing so would jeopardize her residency application in her home-state. (The residency application required her to submit a copy of our tax return to verify that she was not claimed as our dependant.) She does have her own health insurance through her grad program but continues to be on ours with secondary coverage because of her full-time student status. Our insurance did not ask about residency. I don’t think it matters, for insurance purposes, where the child lives as long as they maintain full time student status. Of course there is variation of rules by state, so I don’t know if all this is necessarily true for your situation.</p>
<p>Thanks. Sounds like her situation is similar to mom’s D. We’ll see if her residency is jeopardized in any way if we claim her on taxes for 2009. </p>
<p>I don’t think that the money she gets is technically financial aid, but a merit scholarship; at least the tuition is a merit award. She didn’t file a FAFSA. The University doesn’t consider this money “employment” but “participant stipend.” …</p>
<p>There are IRS rules for dependency, involving an income level that I can’t recall, but it was lower than I thought (planned), which surprised us. Some of the folks in the financial aid forum may be able to quote regs for both IRS (or you can consult your own tax advisor) and federal aid dependency for grad students. </p>
<p>The residency requirements should be well documented on the institution’s webpages. I’d check specifics for any questions through that source.</p>
<p>The insurance aspect tends to be carrier or plan specific, but there can be state regs mandating coverage for FT students, regardless of age. Your policy holder is probably the best source.</p>
<p>Dependent/independent status in the eyes of the IRS, does not play a role in determining state residency.<br>
In my state, she would not have done enough to gain in-state residency because she’ll have to earn half of education expenses in a given year.</p>
<p>You need to check YOUR health insurance for policy info. Many plans in CT also cover students until age 25 BUT the students MUST be residents of CT for that to happen. If your daughter is establishing residency in another state, she would not be covered here…but your policy may be different.</p>
<p>Our son was a grad student in another state BUT we were providing MUCH MORE than half of his support so he was still declared on our taxes AND he was paying OOS tuition. One of the criteria for establishing instate residency was that the student was not declared a dependent on an OOS tax return. Again…check with YOUR kid’s school.</p>
<p>thats a good point thumper, because if she was independent for tax & education purposes, she possibly wouldnt be considered a dependent, unless the only criteria was that she was in school full time.</p>
<p>Our son was a grad student in another state BUT we were providing MUCH MORE than half of his support so he was still declared on our taxes AND he was paying OOS tuition.</p>
<p>The confusing part is that qualifying as a dependent under any one of those categories, IRS, state residency, financial aid, health insurance does not mean qualification for any of the others. You have to read the requirements for every danged thing.</p>
<p>thumper1’s interpretation is the way we went. </p>
<p>If the insurance company says "how can your child be a dependent, if the child is not declaring being a dependent for taxes and has the normal requirements to establish state residency? If child pays state taxes in 1 state, will state also pay taxes in the home state too? If child is paying taxes in just one state, then child is a resident of that state. </p>
<p>I made sure that our’s was completely off our dependency by Dec 31. He got the benefit for 95% of the year and only have to file one state tax rather than two.</p>
<p>D will earn compensation in two states this year: summer earnings here; and her “participant stipend” at the U in the other state. Doesn’t she have to file taxes in both places?</p>
<p>Does she have to file in both states?? You need to check the STATE requirements for filing. Some states only require filing IF state withholding is taken out. Some only require it if the income is higher than a certain amount. Some require filing no matter what. Check the two states.</p>
<p>Our state only requires filing IF state taxes were deducted AND the amount earned was above a certain amount. When my kids were in college…they didn’t have taxes deducted and they earned well below the threshold so they didn’t have to file state taxes HERE. But one of my kids had to file in another state where he went to college.</p>
<p>I’d run some numbers to see if having her as a dependent in 2009 really lowers your taxes significantly. The way exemptions and credits seem to fade out nowadays with increased income levels (which don’t seem particularly high sometimes), if the savings was not significant, I don’t think I’d claim her.</p>
<p>Why does her residency even matter if her tuition is covered by her fellowship? I assume this is just an internal bookkeeping matter at the state U where she’s getting her Ph.D., right? If she’s in-state they charge her X and pay it out of internal funds; if she’s out-of-state they charge her X+Y and pay it out of internal funds, so either way the net cost to her is zero but they want to spend less of their departmental money on internal transfers within the university so they insist she become a state resident? Oh, and maybe they enforce it by saying the fellowship is only worth the price of in-state tuition after the first year, so if you don’t qualify for residency you’re on your own for the difference between in-state and OOS tuition.</p>
<p>Anyway, this seems clearly for the university’s convenience. Your D’s graduate adviser and/or someone in the graduate school must deal with this all the time. I’d just have your D ask them if claiming your D as a dependent on your taxes will affect her residency. Since it’s for their own convenience, they must have this set up to make in-state residency relatively easy to qualify for for supported grad students—and often the rules are different for supported graduate students than for undergrads or even for unsupported graduate/professional students. In the latter categories, they generally want to make it difficult to qualify for state residency because they want the OOS tuition revenue; for supported Ph.D. students, they want to make it easy to qualify for state residency because OOS tuition is (somehow under internal bookkeeping standards) a cost to them, not a revenue source.</p>
<p>I think that you’ve summed up the situation. Our D has no out of pocket expenses for tuition this year (even though she’s not yet a resident), but they will not pay her out of state tuition next year. She’s well on her way to establishing residency, so far as I can tell.</p>
<p>I also think you’re also right that they want to make it harder for undergrads than grads. I’ve told D to contact the “Tuition Classification Officer” and ask wehther our claiming her as a dependent affects her residency. They explain this pretty clearly for “emancipated minors,” but not for “adults” (which D qualifies as)…</p>
<p>fellowships and stipends and TA/RA are taxed.
The level of taxation for impoverished grad students is minimal. Grad students with stipends, fellowships are “paid” students. </p>
<p>We personally realized too late that the our child and we would have been better to claim independence than to claim dependency. The habit of 20 years is hard to break.</p>