Independent vs Dependent tax filing

[retired1]

Now that kids are old enough (19, 21) I'm thinking about not claiming as Dependent. Although they have some PT jobs, they are dependent on us for almost all living & education expenses. Their taxes are filed separately from us but I claim them as Dependent. Can they be considered Independent for tax purposes even though they get >50% support from us ? Just wondering what other parents think. Any pros/cons?

 

[rothlev]

Now that kids are old enough (19, 21) I'm thinking about not claiming as Dependent. Although they have some PT jobs, they are dependent on us for almost all living & education expenses. Their taxes are filed separately from us but I claim them as Dependent. Can they be considered Independent for tax purposes even though they get >50% support from us ? Just wondering what other parents think. Any pros/cons?

Full time students who are not self supporting from the age of 18 - 24 are dependents on their parents tax returns. This generally has no negative ramifications on their own return. If the parents income is too high to claim an education credit there may be a reason to let them claim themselves, not generally no.

 

[njhowie]

Can they be considered Independent for tax purposes even though they get >50% support from us ? Just wondering what other parents think. Any pros/cons?

Yes. Whether you actually provide some level of support really doesn't matter. Claiming child as a dependent is so you can get additional benefit, IRS doesn't care if you take them off and make them independent for tax purposes.

Pro - as there is another round of $1200/$500 stimulus coming, it would obviously be better if they weren't a dependent as they would receive the $1200 rather than the $500.

 

[spncity]

We stopped claiming the last kid as a dependent when she went to an out-of-state college. After a certain amount of time, she could qualify for in-state tuition rates, according to their rules.

 

[rodi]

Pro - as there is another round of $1200/$500 stimulus coming, it would obviously be better if they weren't a dependent as they would receive the $1200 rather than the $500.

But if the next stimulus is based on 2019 filing, then changing filing status of kid in 2020 doesn't help.

This is something we've been discussing now that our 19 year old is working full time.

 

[SecondCor521]

But if the next stimulus is based on 2019 filing, then changing filing status of kid in 2020 doesn't help.

This is something we've been discussing now that our 19 year old is working full time.

The CARES Act stimulus payment was an advance on a credit that will be available on the 2020 Form 1040. For many people, they will have received the advance credit in the past few months which will equal the credit calculated based on their 2020 information.

But for some, like my son, who was my over-17 dependent in 2019 but will not be my dependent in 2020, they will get the credit when they file their 2020 return. This would also apply to people whose AGI dropped from 2019 to 2020 to where they are entitled to a credit or more of a credit than their 2019 tax return would indicate.

I expect the HEROES/LEAPS Act stimulus payments to be treated similarly but we will have to wait and see on those.

...

OP, there are criteria laid out quite clearly (although it can get complicated with college kids) as to whether you can claim someone as a dependent. See the instructions for the dependent line on Form 1040 at the IRS starting at page 16 at https://www.irs.gov/pub/irs-pdf/i1040gi.pdf.

If you claim someone but are not entitled to, that is a problem that could get caught in an audit.

If you are entitled to claim someone and do, that's pretty normal.

If you are entitled to claim someone, you are not required to do so. However:

1. This will usually result in increased taxes for you if you do not.
2. I believe most IRS rules are written as "If you can be claimed by someone else as a dependent, then...." So if you are not claiming them as a dependent in order for them to qualify for some tax benefit, they still would typically not qualify because it is whether you *can* claim them, not whether you *do* claim them. This would, for example, apply to the CARES Act $1,200 credit - if your child was your dependent but you did not claim them, they still would not be entitled to the credit.

So what you should do is read through the rules and see if you can claim them or not. If you can claim them, I really can't think of any typical situation where it would be to your benefit not to claim them. If you wanted to figure the taxes both ways and then decide, you could certainly do that, but again, note that not claiming them when they are claimable usually will not make things better for their tax return.

 

[kaneohe]

You may want to do your/their taxes both ways to compare. Whether they are a dependent or not is a matter of facts, not choice. You can choose not to claim them as dependents if you wish but that doesn't change the fact that they are a dependent.

They will have to answer the question "Are you someone's dependent?" with the answer Yes even if you are not claiming them. This will change their standard deduction from 12400 for a single to 1100 for a dependent.

Did you have a particular reason you don't want to claim them?

 

[rothlev]

You may want to do your/their taxes both ways to compare. This will change their standard deduction from 12400 for a single to 1100 for a dependent.

Did you have a particular reason you don't want to claim them?

for passive income, not for earned income - so most dependent college students still do not pay any income taxes

 

[cathy63]

for passive income, not for earned income - so most dependent college students still do not pay any income taxes

If they have passive income greater than $2200, it's taxed whether you claim them or not. See IRS Form 8615.

Form 8615 must be filed for anyone who meets all of the following conditions.

You had more than $2,200 of unearned income.
You are required to file a tax return.
You were either:
- Under age 18 at the end of 2019,
- Age 18 at the end of 2019 and didn’t have earned income that was more than half of your support, or
- A full-time student at least age 19 and under age 24 at the end of 2019 and didn’t have earned income that was more than half of your support.
(Earned income is defined later. Support is defined below.)

At least one of your parents was alive at the end of 2019.
You don’t file a joint return for 2019.

 

[SevenUp]

Yes. Whether you actually provide some level of support really doesn't matter. Claiming child as a dependent is so you can get additional benefit, IRS doesn't care if you take them off and make them independent for tax purposes.

Pro - as there is another round of $1200/$500 stimulus coming, it would obviously be better if they weren't a dependent as they would receive the $1200 rather than the $500.

No.

The OP may choose not to claim a dependent, but the dependent must still check the box "Someone can claim: You as a dependent" on form 1040 and file accordingly.

The $1200/$500 difference depends on whether the person can be claimed, not whether the person is claimed.

 

[retired1]

We stopped claiming the last kid as a dependent when she went to an out-of-state college. After a certain amount of time, she could qualify for in-state tuition rates, according to their rules.

Great answer. That's our situation also. Thanks for sharing !

 

[retired1]

Yes. Whether you actually provide some level of support really doesn't matter. Claiming child as a dependent is so you can get additional benefit, IRS doesn't care if you take them off and make them independent for tax purposes.

Ok... I did not know that "amount of support" does not determine whether child can be claimed as Dependent or not. When using Turbo Tax, it asks questions about this and automatically determines the child is "Dependent". Otherwise I'd rather have them as "not dependent" (or Independent). Thank you for your answer !!

 

[retired1]

No.

The OP may choose not to claim a dependent, but the dependent must still check the box "Someone can claim: You as a dependent" on form 1040 and file accordingly.

The $1200/$500 difference depends on whether the person can be claimed, not whether the person is claimed.

I'm the OP. I was led by Turbo Tax software questions that determined if child is Dependent. Now that I know, I'd ignore Turbo Tax determination and choose on my own depending our our situation. Thank you for answering !!

 

[SecondCor521]

Ok... I did not know that "amount of support" does not determine whether child can be claimed as Dependent or not. When using Turbo Tax, it asks questions about this and automatically determines the child is "Dependent". Otherwise I'd rather have them as "not dependent" (or Independent). Thank you for your answer !!

njhowie is incorrect.

Whether an individual provides more than half of their support is specifically listed in step 1 of the IRS flowchart in their instructions for how to determine if a child is a dependent. See page 16 in the 2019 version of the IRS instructions at https://www.irs.gov/pub/irs-pdf/i1040gi.pdf.

I haven't looked at TurboTax recently, but they have a good reputation for their product, so I would imagine that they will ask the question when determining whether someone qualifies as your dependent.

 

[SevenUp]

I'm the OP. I was led by Turbo Tax software questions that determined if child is Dependent. Now that I know, I'd ignore Turbo Tax determination and choose on my own depending our our situation. Thank you for answering !!

Not sure you understood the answer.

You may choose whether to claim a dependent that you are allowed to claim, but dependents are bound by whether someone can claim them.

It would be a rare situation in which not claiming a dependent you are allowed to claim works out better for you and the dependent together.

 

[retired1]

Not sure you understood the answer.

You may choose whether to claim a dependent that you are allowed to claim, but dependents are bound by whether someone can claim them.

It would be a rare situation in which not claiming a dependent you are allowed to claim works out better for you and the dependent together.

Thank you for the clarification. I appreciate it !

 

[CRLLS]

I am long past the age of determining if a minor is a dependent or not. But this discussion raises a question I never thought of. If Mom and Dad "gift" to a child, up to the $30K per year limit, is that automatically considered part of their support or can that be just a gift, separate from "support"?

 

[SevenUp]

I am long past the age of determining if a minor is a dependent or not. But this discussion raises a question I never thought of. If Mom and Dad "gift" to a child, up to the $30K per year limit, is that automatically considered part of their support or can that be just a gift, separate from "support"?

Depends what the child does with the money. If used for food, clothing, shelter, etc., then yes it's support. If saved or invested, then no it's not counted for support.

See Worksheet for Determining Support.