Many parents who have children attending college assume that they can claim them as a dependent on their income tax return. Although this may prove to be the case, the opposite might be true as well.
A college student is a dependent of his or her parents only if he or she is a United States citizen, a United States national, or a resident of the United States, Canada, or Mexico. Furthermore, the parent cannot be claimed as a dependent on anyone else’s income tax return, and the child must be a daughter, son, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of these.
The child must be living with the parents for more than half the year in order to qualify as a dependent. Absences due to hospitalization, summer camp, or attending college count as time spent living with the parents.
In order to qualify as a dependent, the child cannot pay for more than half of his or her support during the year.
In order to qualify as a dependent, the child must be under 19 years of age or a full time student for five calendar months of the year. A permanently and totally disabled child’s age does not matter for qualification as a dependent.
Most parents feel that these qualifications are easily met. There are, however, a few land mines. You must be careful that a college student with a full time job is not paying more than half of his or her support. Parents should calculate the support costs against the child’s expenses for food, clothing, and shelter to see if it is indeed possible that the child is paying more than half of their own support.
A tricky way to lose a dependent college child is through a student loan. Let’s say that your child has a student loan for $20,000 for tuition. For tax purposes a student loan is considered a form of support. That means that you had better be paying in excess of $20,000 for that child’s support or he or she is no longer your dependent.
In addition, let’s say that your child has a part time job where he or she earns $5000 a year. Now, you would need to show support expenses in excess of $25,000 to continue to claim your child as a dependent.
It just goes to show that you should never assume anything when it comes to taxes, including the dependent status of your own children.
Chintamani Abhyankar, is a well known expert in the field of finance and taxation for last 25 years. His famous Tax eBook “Stop donating your money to IRS” which is now running in its second edition, provides intricate knowledge and valuable tips on personal finance and income tax. Just visit his website http://www.planningyourtax.com/ and claim your FREE eBook
