Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
When are children considered independent for tax purposes?
Old 04-25-2017, 12:11 PM   #1
Full time employment: Posting here.
 
Join Date: Aug 2014
Posts: 576
When are children considered independent for tax purposes?

As title says. Having a hard time getting a handle on all this. Second son is about to attend college on a full ride plus stipend. Older son has been in same position for several years now. With summer work and stipend they will both be making more than required for their health insurance (even though last year we put them both on our policy) and any other expenses. In older son's case, he has always had internships in another state so at best he is here for only a few weeks a year.

At what point does the IRS consider them off our taxes? Any disadvantages for them or us for them being considered independent?
__________________

ArkTinkerer is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 04-25-2017, 12:31 PM   #2
Thinks s/he gets paid by the post
2017ish's Avatar
 
Join Date: Apr 2012
Posts: 1,851
We ran tax returns both ways and took the best way--with phaseouts, it often was best for them to be independent and not on our return.

Technically, if they provide over half their own support, they are independent. Here is a good distillation of the rules: Who Qualifies as a Dependent for Tax Purposes? | Nolo.com

The best IRS source is Publication 501, beginning at page 11: https://www.irs.gov/pub/irs-pdf/p501.pdf
__________________

__________________
OMY * 3 2ish Done 7.28.17
2017ish is offline   Reply With Quote
Old 04-25-2017, 12:32 PM   #3
Thinks s/he gets paid by the post
Fedup's Avatar
 
Join Date: Mar 2014
Location: Southern Cal
Posts: 4,032
According to Turbotax, under 24 and full time student.
For me the first year that I don't pay for tuition.
Fedup is offline   Reply With Quote
Old 04-25-2017, 04:40 PM   #4
Thinks s/he gets paid by the post
 
Join Date: Jan 2008
Posts: 1,043
Keep in mind that if they meet the definition of a qualified child (or qualified relative), even if you choose not to claim them as a dependent, they cannot claim themselves for an exemption on their own taxes.
jebmke is offline   Reply With Quote
Old 04-25-2017, 07:37 PM   #5
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 3,796
If you are a glutton for rigor and punishment, try this:
https://www.irs.gov/pub/irs-pdf/p4012.pdf

on p.C5 is a table for the dependency test. Be sure to answer carefully and to read all footnotes. On p. C9 is a worksheet for calculating support. Some potentially tricky spots: students away from home for school are considered temporarily away from home but still living there So do you take the expenses of that household into account even tho
student is not there much of the time? Or do you take the "local" expenses at school?
or both? For the education free ride: You might consider the full expenses of that education (if unsubsidized) as a cost. Then the question is who is paying that expense...... is it the school (or perhaps state) or is it the student who is getting the free ride?
kaneohe is offline   Reply With Quote
Old 04-25-2017, 11:05 PM   #6
Full time employment: Posting here.
 
Join Date: Aug 2014
Posts: 576
Quote:
Originally Posted by kaneohe View Post
If you are a glutton for rigor and punishment, try this:
https://www.irs.gov/pub/irs-pdf/p4012.pdf

For the education free ride: You might consider the full expenses of that education (if unsubsidized) as a cost. Then the question is who is paying that expense...... is it the school (or perhaps state) or is it the student who is getting the free ride?
Thanks for the link. Interesting view of the last question--I just viewed the scholarship/stipend as free money. All other expenses will be met by the student from summer earnings. So, by the support measure, the boys will be or have been supplying the majority of their expenses. Both certainly will earn more than enough to cover all their own expenses.
ArkTinkerer is offline   Reply With Quote
Old 04-26-2017, 09:16 AM   #7
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 3,796
Quote:
Originally Posted by ArkTinkerer View Post
Thanks for the link. Interesting view of the last question--I just viewed the scholarship/stipend as free money. All other expenses will be met by the student from summer earnings. So, by the support measure, the boys will be or have been supplying the majority of their expenses. Both certainly will earn more than enough to cover all their own expenses.
From a TT link: https://ttlc.intuit.com/questions/27...files-a-return
************************************************** *********
"Here’s the general rules gisted from IRS Publication 970 at http://www.irs.gov/pub/irs-pdf/p970.pdf

If the student:
Is under the age of 24 on Dec 31 of the tax year and:
Is enrolled in an undergraduate program at an accredited institution and:
Is enrolled as at least a half time student for one academic semester that begins during the tax year, (each institution has their own definition of a half time student) and:

the student provides less that 50% of the student's support (schollarships/grants received by the student do not count as the student providing their own support)

Then:
The parents will claim the student as a dependent on the parent's tax return and:
************************************************** ********

The interesting thing is the bolded sentence that says that scholarships/grants received by the student do not count as the student providing their own support. That suggests that either that a 3rd party (school /state) is providing the support for education costs listed in the worksheet or perhaps that you do not consider the education costs at all Perhaps Pub 970 has more
info.

more for gluttons for punishment:
https://www.google.com/#q=is+scholar...dependent+test

come back w/ the right answer. I want to know too.
kaneohe is offline   Reply With Quote
Old 04-26-2017, 09:34 AM   #8
Thinks s/he gets paid by the post
 
Join Date: Mar 2013
Location: Coronado
Posts: 1,253
Quote:
Originally Posted by kaneohe View Post
From a TT link: https://ttlc.intuit.com/questions/27...files-a-return
************************************************** *********
"Here’s the general rules gisted from IRS Publication 970 at http://www.irs.gov/pub/irs-pdf/p970.pdf

If the student:
Is under the age of 24 on Dec 31 of the tax year and:
Is enrolled in an undergraduate program at an accredited institution and:
Is enrolled as at least a half time student for one academic semester that begins during the tax year, (each institution has their own definition of a half time student) and:

the student provides less that 50% of the student's support (schollarships/grants received by the student do not count as the student providing their own support)

Then:
The parents will claim the student as a dependent on the parent's tax return and:
************************************************** ********

The interesting thing is the bolded sentence that says that scholarships/grants received by the student do not count as the student providing their own support. That suggests that either that a 3rd party (school /state) is providing the support for education costs listed in the worksheet or perhaps that you do not consider the education costs at all Perhaps Pub 970 has more
info.

more for gluttons for punishment:
https://www.google.com/#q=is+scholar...dependent+test

come back w/ the right answer. I want to know too.
Here is the actual U.S. code: https://www.law.cornell.edu/uscode/text/26/152

See section (f)(5): Special support test in case of students
Quote:
For purposes of subsections (c)(1)(D) and (d)(1)(C), in the case of an individual who is—
(A) a child of the taxpayer, and
(B) a student,
amounts received as scholarships for study at an educational organization described in section 170(b)(1)(A)(ii) shall not be taken into account.
cathy63 is offline   Reply With Quote
Old 04-26-2017, 09:51 AM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,967
Quote:
Originally Posted by jebmke View Post
Keep in mind that if they meet the definition of a qualified child (or qualified relative), even if you choose not to claim them as a dependent, they cannot claim themselves for an exemption on their own taxes.
Could you cite a support document for that?

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 04-26-2017, 10:10 AM   #10
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 3,796
Quote:
Originally Posted by haha View Post
Could you cite a support document for that?

Ha
Your Own Exemption
You can take one exemption for yourself unless you can be claimed as a dependent by another taxpayer. If another taxpayer is entitled to claim you as a dependent, you can’t take an exemption for yourself even if the other taxpayer doesn't actually claim you as a dependent.

https://www.irs.gov/publications/p17/ch03.html
kaneohe is offline   Reply With Quote
Old 04-26-2017, 10:20 AM   #11
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 3,796
Quote:
Originally Posted by cathy63 View Post
Here is the actual U.S. code: https://www.law.cornell.edu/uscode/text/26/152

See section (f)(5): Special support test in case of students

Thanks,cathy...........just to make sure I understand: student has 20K of educational expenses but also gets 20K of scholarships. Student has 10K
of other expenses which student pays for.

"amounts received as scholarships for study at an educational organization described in section 170(b)(1)(A)(ii) shall not be taken into account.'

Does student in example have 30K of expenses of which he paid 10K so he is still a dependent (paid < 50%)? Or does student have 10K of expenses
and he paid all of it so he is not a dependent? (ignores educational expenses).
kaneohe is offline   Reply With Quote
Old 04-26-2017, 01:43 PM   #12
Thinks s/he gets paid by the post
 
Join Date: Mar 2013
Location: Coronado
Posts: 1,253
Quote:
Originally Posted by kaneohe View Post
Thanks,cathy...........just to make sure I understand: student has 20K of educational expenses but also gets 20K of scholarships. Student has 10K
of other expenses which student pays for.

"amounts received as scholarships for study at an educational organization described in section 170(b)(1)(A)(ii) shall not be taken into account.'

Does student in example have 30K of expenses of which he paid 10K so he is still a dependent (paid < 50%)? Or does student have 10K of expenses
and he paid all of it so he is not a dependent? (ignores educational expenses).
My understanding is that tuition and other necessary college costs are included in the amount of needed support. It doesn't matter where the actual funds come from as long as more than half come from a source other than the student himself (student loans count as coming from the student). So in your example, the parents could indeed legally claim the student as a dependent even though they provided no financial support.
cathy63 is offline   Reply With Quote
Old 04-26-2017, 02:31 PM   #13
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 3,796
Quote:
Originally Posted by cathy63 View Post
My understanding is that tuition and other necessary college costs are included in the amount of needed support. It doesn't matter where the actual funds come from as long as more than half come from a source other than the student himself (student loans count as coming from the student). So in your example, the parents could indeed legally claim the student as a dependent even though they provided no financial support.
Thanks, cathy ............appreciate the clarification. I think that would have been my weak 1st guess but I wasn't very sure. It would been nice to have had a few words that said the source of the scholarship was not the student.

btw.......I admire folks that can find IRS code links and even understand them.
When I see stuff like "section 170(b)(1)(A)(ii", I don't even want to look and
when "subsections (c)(1)(D) and (d)(1)(C", it boggles my mind. I know it is
written in English but my brain gets boggled and thinks it's a foreign language.
kaneohe is offline   Reply With Quote
Old 04-26-2017, 04:22 PM   #14
Thinks s/he gets paid by the post
 
Join Date: Mar 2013
Location: Coronado
Posts: 1,253
Quote:
Originally Posted by kaneohe View Post
btw.......I admire folks that can find IRS code links and even understand them.
When I see stuff like "section 170(b)(1)(A)(ii", I don't even want to look and
when "subsections (c)(1)(D) and (d)(1)(C", it boggles my mind. I know it is
written in English but my brain gets boggled and thinks it's a foreign language.
LOL! All I can say is definitely do not try to read the FAR (Federal Acquisition Regulation) then. I used to have to do that as part of my job, and I've got to say the parts of the Internal Revenue Code I've looked at are a heck of a lot easier to understand.
cathy63 is offline   Reply With Quote
Old 04-26-2017, 05:04 PM   #15
Thinks s/he gets paid by the post
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 3,725
Question about the residency portion of the test for qualifying child.

I have three children with my ex. Shared physical custody 40 me / 60 her. I pay child support, and there is nothing in our agreement or state law about what happens after high school is done. I claim the dependency exemptions and tax credits per the divorce agreement (I was the higher earner, now retired).

My younger two kids will each graduate at the end of May 2019 and 2020, respectively. I anticipate them both going to college in the August or September of 2019 and 2020. I will be paying for any of their college that isn't covered by scholarships.

I'm filing single nowadays because I don't have any qualifying children - my oldest is living at home but supports himself and is not a full time student, the younger two currently fail the residency test.

I'd like to file HOH in 2019 and 2020 on the argument that I can count residency as 40% of the first part of the year up until they go off to college, then 100% residency once they start college in the fall under the temporary absence clause since I'm paying their college expenses. (40% * 8 months) + (100% * 4 months) > half the year.

Thoughts?
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is offline   Reply With Quote
Old 04-26-2017, 06:54 PM   #16
Thinks s/he gets paid by the post
Rambler's Avatar
 
Join Date: Jul 2007
Posts: 2,283
If you use a tax preparer, best to ask them.

For us, when the kids went off to college, we paid tuition, books, apt rent, and for the first year, we also gave an allowance for food and necessities. We told them that after the first year, they were expected to have p/t jobs to cover that. During that period, I claimed them as dependent. When DD got married after her second year in college, I told her I'd give her the same amount for rent as I had been paying as long as she kept going to university...after two months, I saw she hadn't touched the money, so I asked her about it. She said that they were doing fine and wouldn't need help to pay their rent. I still paid tuition and books that year, but I stopped claiming her as a dependent. The following year, she made me real proud...she did so well in school that she got a scholarship for her last year, so I paid just for books. He husband also had a scholarship for his last two years. Since they were in Hawaii for school, I told her that I'd buy her the car I'd promised after she returned to the mainland, and she agreed that this was the right thing to do. So, I saved all that rent money and tuition money, and she got a much nicer car than her older brother. DS took 5 years to graduate university, but went year round, costing me the equivalent of 7 years' tuition, and, I bought him a car during his first year because he complained that he could get a job without one (never mind the decent if not great bus service in the city he was in). I continued to claim him as a dependent until he also got married, which was about 8 months before his graduation. All in all, his education, including the car, insurance, and the extra year I sent money for food because he lost his p/t job was WAY more than what I spent on his sister's education...and now all I hear is how unfair it was that her car cost $4000 more than his...

Kinda got a little off topic...but yeah...once they were married and HAD to earn enough, I quit claiming them as dependents.
__________________
Find Joy in the Journey...
Rambler is offline   Reply With Quote
Old 04-27-2017, 07:39 PM   #17
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 3,796
Quote:
Originally Posted by SecondCor521 View Post
Question about the residency portion of the test for qualifying child.

I have three children with my ex. Shared physical custody 40 me / 60 her. I pay child support, and there is nothing in our agreement or state law about what happens after high school is done. I claim the dependency exemptions and tax credits per the divorce agreement (I was the higher earner, now retired).

My younger two kids will each graduate at the end of May 2019 and 2020, respectively. I anticipate them both going to college in the August or September of 2019 and 2020. I will be paying for any of their college that isn't covered by scholarships.

I'm filing single nowadays because I don't have any qualifying children - my oldest is living at home but supports himself and is not a full time student, the younger two currently fail the residency test.

I'd like to file HOH in 2019 and 2020 on the argument that I can count residency as 40% of the first part of the year up until they go off to college, then 100% residency once they start college in the fall under the temporary absence clause since I'm paying their college expenses. (40% * 8 months) + (100% * 4 months) > half the year.

Thoughts?
Very creative thinking! Have no idea what the truth is.....perhaps you could
post your question at fairmark.com in the "Other Tax Questions" forum.
In the meantime perhaps this might be helpful
https://www.irs.gov/pub/irs-pdf/p4012.pdf
p. B-1 on filing status; p.B-1 on HOH qualification;p.C3 on qualifying child;
p. C-4 on tiebreaker rules

"Qualifying Child of More Than One Person
If the child meets the conditions to be the qualifying child of more than one person, only one person can claim the child
as a qualifying child
for all of the following tax benefits, unless the special rule for children of divorced or separated parents applies.
• Dependency Exemption
Head of Household
• ..................................................

If the parents don’t file a joint return together but both parents claim the child as a qualifying child, the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year.If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income (AGI) for the year"

************************************************** ********
I sense that your ex could also make the same claim that you are proposing but only one can "win" so if you could come to some agreement, perhaps that would work; else it sounds like the parent w/ whom the child lived for the longer period of time during the yr. would.

Interesting and tough question. Not sure how your paying the college expenses
plays a role in the HOH part......since that seems to deal w/ the household expenses
kaneohe is offline   Reply With Quote
Old 04-27-2017, 08:06 PM   #18
Thinks s/he gets paid by the post
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 3,725
@kaneohe, thanks for the reply. I doubt the ex would claim either of the kids, for several reasons: (1) She is remarried, so she presumably files MFJ; having a qualifying dependent doesn't help her the way it would help me, (2) By our agreement, I've been claiming the kids as dependents since our divorce in 2006 and she isn't financially inclined, so I doubt the thought would even occur to her to claim them.

Regarding the last bolded bit in your reply, I think the question comes down to where the IRS thinks my kid lived the last four months of the year - with me, because I'm paying college expenses, or at the 40/60 rate, since that is where they lived during the first 8 months of the year. I think I'm actually on pretty firm ground with my argument, since the way our divorce agreement is written and the way state law reads, the divorce agreement ends when I stop paying child support.

What could mess up my plans / math is if the kids decide for whatever reason to spend that entire summer between high school and college living with their Mom. My opinion is, once I stop paying child support, they can stay at either house whenever they want.
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is offline   Reply With Quote
Old 04-27-2017, 08:27 PM   #19
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 3,796
Quote:
Originally Posted by SecondCor521 View Post
............................

What could mess up my plans / math is if the kids decide for whatever reason to spend that entire summer between high school and college living with their Mom. .....................
depends on how long summer is?
40% ( 5mos) + 100% (4mos) = 6 mos. = not quite enough
40% (5.1 mo) + 100% (4 mos) = 6.04 mos. = > half
maybe you need to send them to school early and watch out for Xmas vacation
kaneohe is offline   Reply With Quote
Old 04-27-2017, 10:53 PM   #20
Thinks s/he gets paid by the post
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 3,725
Quote:
Originally Posted by kaneohe View Post
depends on how long summer is?
40% ( 5mos) + 100% (4mos) = 6 mos. = not quite enough
40% (5.1 mo) + 100% (4 mos) = 6.04 mos. = > half
maybe you need to send them to school early and watch out for Xmas vacation
I'll just bribe them to live with me. A couple of boxes of donuts and some pizza doesn't take much out of my tax deduction :-)

Although taxes in 2019 may look different than they do now. That's another potential monkey wrench. Will wait and see.
__________________

__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Mail Forwarding Service as Resident Address for Tax Purposes FIGuy Other topics 2 05-05-2014 06:47 PM
Which accounting method (tax purposes) do you choose and why? younginvestor2013 FIRE and Money 9 05-23-2013 10:26 PM
Moving IRA to foreign country for tax purposes Zero FIRE and Money 13 12-05-2010 07:23 AM
Do you allocate investments for tax purposes? Florida Other topics 4 09-22-2008 10:34 PM
Health Insurance for almost independent children jj Other topics 7 10-24-2006 11:27 PM

» Quick Links

 
All times are GMT -6. The time now is 02:07 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2019, vBulletin Solutions, Inc.
×