At age 19, children generally become ineligible to be claimed as a dependent on the tax return of a parent. An exception to the general rule applies to full-time college students. Parents with a child in college may be able to claim the child as a dependent if the child is under age 24 at the end of the tax year. Even if a working student files a separate tax return, there is still only one sole personal exemption for the child that can be claimed on one of the two returns.
To be claimed as a dependent, a college student must attend a qualifying educational institution on a full-time basis for at least five months out of the year. A qualifying institution is a technical school, college, or university that is eligible to participate in a federal loan program administered by the U.S. Department of Education. The other basic requirements for claiming a dependent also apply to college students.
Your child must reside with you for over half the year. However, time spent away at school may be considered temporary. As long as your home serves as your child's legal domicile for over half the year, the residency requirement is satisfied. If your child is employed, earnings applied toward their own support may affect their dependency status.
Some students provide a portion of their own support by working. To claim a person as a dependent, that individual must not have provided over half of their own support. If the support test is met and you are eligible to claim a student on your own tax return, the income tax status of your child becomes affected.
Only one personal exemption allowed
Typical tax filers are able to reduce their taxable income by both a standard deduction amount and a personal exemption amount. The standard deduction amount is based on filing status, and the personal exemption is a fixed amount allowed for each person listed on the return. If you are eligible to claim your child as a dependent, the child is not allowed to claim their own personal exemption.
Even though a dependent can usually take their own standard deduction, their taxable income cannot be reduced by their personal exemption. College-age tax filers are sometimes surprised to learn that their taxable income is higher than expected due to losing their personal exemption. However, families usually fare better overall when the parent claims the child as a dependent.
Other tax benefits may arise due to the inclusion of a dependent child on your tax return. Despite their maturity, college-age dependents might still qualify you for the earned income credit. Communication is key to ensuring that your college-age children understand how your tax return may affect their tax status. Contact a tax service company like Tri Check Inc for more specific advice on tax preparation.
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