I was re-reading some of my old threads and wanted to post a follow up.
The DS20 mentioned did end up filing his own tax return as not-my-dependent. Although we chose this based on an honest reading of the facts and circumstances of him and his 2020 year, it does look like it also turned out for the best tax-wise. He was able to claim EIP1 and EIP2 on his 2020 return, and ended up with zero federal income tax liability, although he had SE taxes to pay on his SE income.
I elected to skip having him claim the AOTC for 2020 as the fact set was simply too unclear to determine whether or not he would qualify, and I feel confident that I will have three more tax years of him in undergraduate that will be better suited to the credit.
I will note for completeness that for us the AOTC is generally better claimed on the parents' return, as on the student's return the non-refundable portion can be wasted due to lack of offsetting income tax liability.
Originally Posted by sengsational
That's a great UTMA story. Being independent, your income and assets don't go on the FAFSA. So although they expect the student to wipe out all their assets in 4 years, at least they don't expect a pound of flesh from you.
I also wanted to comment on this.
"Tax independent" and "FAFSA independent" are two different things determined in two different ways. It is much harder to be a FAFSA independent. So even if your kid is a tax independent it is quite likely that you as a parent will be required to put your income and assets on their FAFSA and their SAI (formerly EFC) will be affected. (*)
(*) There are a couple of FAFSA loopholes that may excuse you from reporting assets - SNT and auto-zero EFC.