Question About Claiming Son as Dependent

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stuper1
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Question About Claiming Son as Dependent

Post by stuper1 »

I'm not clear on something in regard to whether my wife and I can claim my son as a dependent. He is a 20 year old student going to the local college and living full time with us. We don't charge him rent, and we pay almost all his expenses, including housing, utilities, groceries, most clothes, tuition, and books. The only things he pays for are half his car insurance and gas/oil/etc. for his car. So, based on the criteria that says if you provide at least half a person's support, it seems we should be able to claim him as a dependent.

Here's where it gets complicated though. He made about $16,000 last year at a W-2 job, and will need to file his own tax return. Most of that $16,000 he just spent on car expenses, hobbies, or going out with his friends or saved and invested (including some money which we matched in a Roth IRA). So, in theory he did make enough money to pay for more than half of his expenses last year. Does that mean we can't claim him as a dependent?
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cdc
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Re: Question About Claiming Son as Dependent

Post by cdc »

If you pay his expenses, he’s a dependent. All individuals who get a w-2 must file their own tax returns if they owe or if they want to claim a refund.
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Re: Question About Claiming Son as Dependent

Post by Grt2bOutdoors »

stuper1 wrote: Sat Apr 17, 2021 10:31 pm I'm not clear on something in regard to whether my wife and I can claim my son as a dependent. He is a 20 year old student going to the local college and living full time with us. We don't charge him rent, and we pay almost all his expenses, including housing, utilities, groceries, most clothes, tuition, and books. The only things he pays for are half his car insurance and gas/oil/etc. for his car. So, based on the criteria that says if you provide at least half a person's support, it seems we should be able to claim him as a dependent.

Here's where it gets complicated though. He made about $16,000 last year at a W-2 job, and will need to file his own tax return. Most of that $16,000 he just spent on car expenses, hobbies, or going out with his friends or saved and invested (including some money which we matched in a Roth IRA). So, in theory he did make enough money to pay for more than half of his expenses last year. Does that mean we can't claim him as a dependent?
He's still your dependent. You are paying the bulk of his expenses, more than half I'd say by that description. You're paying for his clothes? That's generous of you. He will file but he will also be responsible for paying taxes and if you claim the deduction, then he can not. He might owe money, so best to prepare him now especially if he did not have tax witholdings on those earnings during the course of the year.
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Re: Question About Claiming Son as Dependent

Post by Metsfan91 »

stuper1 wrote: Sat Apr 17, 2021 10:31 pm I'm not clear on something in regard to whether my wife and I can claim my son as a dependent. He is a 20 year old student going to the local college and living full time with us. We don't charge him rent, and we pay almost all his expenses, including housing, utilities, groceries, most clothes, tuition, and books. The only things he pays for are half his car insurance and gas/oil/etc. for his car. So, based on the criteria that says if you provide at least half a person's support, it seems we should be able to claim him as a dependent.

Here's where it gets complicated though. He made about $16,000 last year at a W-2 job, and will need to file his own tax return. Most of that $16,000 he just spent on car expenses, hobbies, or going out with his friends or saved and invested (including some money which we matched in a Roth IRA). So, in theory he did make enough money to pay for more than half of his expenses last year. Does that mean we can't claim him as a dependent?
Your son will have to file tax return whether you claim him as a dependent or not.

Yes, you can claim your son as a dependent. Just because you can claim doesn't mean you should or you have to. What would be your benefit for claiming him as your dependent?

Do you have state income tax? If you claim him on your federal return, you will have to claim him on state return as well. Some states have lower standard deduction for anyone who can be claimed as dependent. Your son will pay more in state income tax. On flip side, you get to claim 1 extra exemption on your state return, so your state taxable income will be lower.
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OhioGozaimas
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Re: Question About Claiming Son as Dependent

Post by OhioGozaimas »

From the Form 1040 Header:

Standard Deduction
Someone can claim: |box| You as a dependent

(Your son must check this box, whether or not you actually do claim him on your return.)

https://www.irs.gov/pub/irs-pdf/f1040.pdf
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FiveK
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Re: Question About Claiming Son as Dependent

Post by FiveK »

stuper1 wrote: Sat Apr 17, 2021 10:31 pm So, in theory he did make enough money to pay for more than half of his expenses last year. Does that mean we can't claim him as a dependent?
You could fill out https://apps.irs.gov/app/vita/content/g ... t_4012.pdf to know for sure.
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stuper1
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Re: Question About Claiming Son as Dependent

Post by stuper1 »

FiveK wrote: Sun Apr 18, 2021 5:04 am
stuper1 wrote: Sat Apr 17, 2021 10:31 pm So, in theory he did make enough money to pay for more than half of his expenses last year. Does that mean we can't claim him as a dependent?
You could fill out https://apps.irs.gov/app/vita/content/g ... t_4012.pdf to know for sure.
Thank you! That is very helpful.
A 10-20% allocation to gold has helped with the sequence of returns problem. Some gold held physically is also good insurance against the all-digital-assets problem.
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stuper1
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Re: Question About Claiming Son as Dependent

Post by stuper1 »

Metsfan91 wrote: Sat Apr 17, 2021 11:18 pm
stuper1 wrote: Sat Apr 17, 2021 10:31 pm I'm not clear on something in regard to whether my wife and I can claim my son as a dependent. He is a 20 year old student going to the local college and living full time with us. We don't charge him rent, and we pay almost all his expenses, including housing, utilities, groceries, most clothes, tuition, and books. The only things he pays for are half his car insurance and gas/oil/etc. for his car. So, based on the criteria that says if you provide at least half a person's support, it seems we should be able to claim him as a dependent.

Here's where it gets complicated though. He made about $16,000 last year at a W-2 job, and will need to file his own tax return. Most of that $16,000 he just spent on car expenses, hobbies, or going out with his friends or saved and invested (including some money which we matched in a Roth IRA). So, in theory he did make enough money to pay for more than half of his expenses last year. Does that mean we can't claim him as a dependent?
Your son will have to file tax return whether you claim him as a dependent or not.

Yes, you can claim your son as a dependent. Just because you can claim doesn't mean you should or you have to. What would be your benefit for claiming him as your dependent?

Do you have state income tax? If you claim him on your federal return, you will have to claim him on state return as well. Some states have lower standard deduction for anyone who can be claimed as dependent. Your son will pay more in state income tax. On flip side, you get to claim 1 extra exemption on your state return, so your state taxable income will be lower.
I don't quite understand what you're saying. Are there cases where I could claim him as a dependent but I shouldn't? You said "some states have lower standard deduction for anyone who can be claimed as dependent". So the state hit happens whether we claim him or not; all that matters is whether we can claim him.
Last edited by stuper1 on Sun Apr 18, 2021 10:42 am, edited 1 time in total.
A 10-20% allocation to gold has helped with the sequence of returns problem. Some gold held physically is also good insurance against the all-digital-assets problem.
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stuper1
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Re: Question About Claiming Son as Dependent

Post by stuper1 »

So, now I have a followup question which is a bit more complicated. This is my son's final year in college. We started to see last year that we had oversaved in his 529 plan (not by too much). You're allowed to make withdrawals from the 529 for room and board expenses even if he is living at home, so we did that last year. Here's a rough breakdown of expenses:

$16,000 son's total expenses including room/board, education, etc

$3,000 paid by son
$3,400 paid from scholarship
$5,200 paid from 529 plan ($3,200 basis plus $2,000 earnings)
$4,400 paid by us out of pocket

So, we only paid half of his support if we include the money that came from the 529 plan. Maybe we're only allowed to use the basis in the 529 plan for this purpose, which would give us $3,200 plus $4,400 equals $7,600, which is less than half of his support? Does anyone know the correct answer?
A 10-20% allocation to gold has helped with the sequence of returns problem. Some gold held physically is also good insurance against the all-digital-assets problem.
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Re: Question About Claiming Son as Dependent

Post by pshonore »

stuper1 wrote: Sun Apr 18, 2021 10:34 am So, now I have a followup question which is a bit more complicated. This is my son's final year in college. We started to see last year that we had oversaved in his 529 plan (not by too much). You're allowed to make withdrawals from the 529 for room and board expenses even if he is living at home, so we did that last year. Here's a rough breakdown of expenses:

$16,000 son's total expenses including room/board, education, etc

$3,000 paid by son
$3,400 paid from scholarship
$5,200 paid from 529 plan ($3,200 basis plus $2,000 earnings)
$4,400 paid by us out of pocket

So, we only paid half of his support if we include the money that came from the 529 plan. Maybe we're only allowed to use the basis in the 529 plan for this purpose, which would give us $3,200 plus $4,400 equals $7,600, which is less than half of his support? Does anyone know the correct answer?
Why does everyone think you have to pay at least 1/2 of a childs expenses to claim them. That just not true! The rule states the child cannot provide more than 1/2 of their support. Suppose Grandma gives him money, or a sibling or a girlfriend. Thats fine. Who provided support during the summer or on breaks? Sounds to me like he did not pay 1/2.
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Re: Question About Claiming Son as Dependent

Post by gobel »

It's possible the son provided more than 1/2 his own support: 3000+5200. The key question is whether the 529 checks were made out to the son or the parent (ie who's ssn is on the 1099Q that you received)? If it's the son, then IMHO, he gets the whole ball of wax: refundable AOTC, no kiddie tax, Stimulus 1 and 2 on the 2020 return, and Stimulus 3 later this year after he has filed. He would not check the "someone can claim you as a dependent" box.
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FiveK
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Re: Question About Claiming Son as Dependent

Post by FiveK »

It appears the IRS has not ruled on who is providing the support that comes from 529 plans. One can find various arguments for either the parent(s) or the student.

The argument that it is the account owner who provides the support seems the most compelling. Because the owner, not the current beneficiary, is the one who chooses whether or not to disburse funds, saying the support comes from the owner is reasonable. But I'm not the IRS....

If the student is also the owner, things are clear: 529 distributions are support from the student. If the student is not the owner, then the support is coming from the owner, not the student.

As pshonore noted, the support test for a qualifying child is not whether the parents provided more than half, it is whether the child provided less than half. E.g., if a grandparent owned the 529 that provided 55%, the student would still be the parents' dependent.
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Re: Question About Claiming Son as Dependent

Post by an_asker »

Metsfan91 wrote: Sat Apr 17, 2021 11:18 pm [...]
Your son will have to file tax return whether you claim him as a dependent or not.

Yes, you can claim your son as a dependent. Just because you can claim doesn't mean you should or you have to. What would be your benefit for claiming him as your dependent?
[...]
There is not much benefit to claiming son as dependent; on the contrary, doing so directly means that son will have to pay more in taxes than he otherwise would. Why? Because he will be dinged at your (parent's) tax rate.

But that is the law. I learned this from an earlier thread on this very forum.

PS: I cannot say anything about the advantage on state income taxes as FL has none
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Re: Question About Claiming Son as Dependent

Post by DIFAR31 »

an_asker wrote: Sun Apr 18, 2021 2:14 pm
Metsfan91 wrote: Sat Apr 17, 2021 11:18 pm [...]
Your son will have to file tax return whether you claim him as a dependent or not.

Yes, you can claim your son as a dependent. Just because you can claim doesn't mean you should or you have to. What would be your benefit for claiming him as your dependent?
[...]
There is not much benefit to claiming son as dependent; on the contrary, doing so directly means that son will have to pay more in taxes than he otherwise would. Why? Because he will be dinged at your (parent's) tax rate.

But that is the law. I learned this from an earlier thread on this very forum.

PS: I cannot say anything about the advantage on state income taxes as FL has none
1. Claiming a child as a tax dependent can be beneficial to the parent in that the child tax credit or credit for other dependents may be available.

2. A child who files his own tax return and who is claimed as a dependent on a parent tax return will not necessarily "have to pay more in taxes than he otherwise would." This will only come into play if the child has unearned income (using the kiddie tax definition of that term) over a certain amount.
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Re: Question About Claiming Son as Dependent

Post by Katietsu »

I am not sure you are counting support items correctly. All that money he spends on his car and going out with friends is part of his support even though it is not a basic need. If he spends $5000 on a super expensive hotel and extremely high end alcohol during spring break, that counts as $5000 towards his support total. If he buys an impractical overpriced car, any of his money going to that is support. In other words, transportation, travel, recreation, food and beverages (including alcohol) should all be part of the support equation. Savings and investments, does not count at all, either towards his column or towards the total.

On the other hand, was your number for his share of household expenses high enough? Read about the worksheet for determining support if you have not done so.


If the 529 is overfunded, why the $4400 out of your pocket? Understand that you can use 529 money and still claim the AOTC if you pay tax on the earnings. This gets a bit complicated, so definitely read up if this is relevant.
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Re: Question About Claiming Son as Dependent

Post by HereToLearn »

DIFAR31 wrote: Sun Apr 18, 2021 2:35 pm
an_asker wrote: Sun Apr 18, 2021 2:14 pm
Metsfan91 wrote: Sat Apr 17, 2021 11:18 pm [...]
Your son will have to file tax return whether you claim him as a dependent or not.

Yes, you can claim your son as a dependent. Just because you can claim doesn't mean you should or you have to. What would be your benefit for claiming him as your dependent?
[...]
There is not much benefit to claiming son as dependent; on the contrary, doing so directly means that son will have to pay more in taxes than he otherwise would. Why? Because he will be dinged at your (parent's) tax rate.

But that is the law. I learned this from an earlier thread on this very forum.

PS: I cannot say anything about the advantage on state income taxes as FL has none
1. Claiming a child as a tax dependent can be beneficial to the parent in that the child tax credit or credit for other dependents may be available.

2. A child who files his own tax return and who is claimed as a dependent on a parent tax return will not necessarily "have to pay more in taxes than he otherwise would." This will only come into play if the child has unearned income (using the kiddie tax definition of that term) over a certain amount.
Thank you for clarifying, as I have been confused by the few posts saying that the student would lose all tax benefit simply because the parent claimed the student as a dependent.

I have claimed my children as dependents on my taxes, they have indicated that fact on their taxes, and they still enjoy the single standard exemption of $12K & change. The one who received a summer stipend to support his research did have to pay kiddie tax on the stipend earnings, but did not owe taxes on his other W-2 earnings.
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Re: Question About Claiming Son as Dependent

Post by SimonJester »

an_asker wrote: Sun Apr 18, 2021 2:14 pm There is not much benefit to claiming son as dependent; on the contrary, doing so directly means that son will have to pay more in taxes than he otherwise would. Why? Because he will be dinged at your (parent's) tax rate.
The AOTC is a huge benefit to the parents if they qualify otherwise...
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stuper1
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Re: Question About Claiming Son as Dependent

Post by stuper1 »

pshonore wrote: Sun Apr 18, 2021 11:52 am
stuper1 wrote: Sun Apr 18, 2021 10:34 am So, now I have a followup question which is a bit more complicated. This is my son's final year in college. We started to see last year that we had oversaved in his 529 plan (not by too much). You're allowed to make withdrawals from the 529 for room and board expenses even if he is living at home, so we did that last year. Here's a rough breakdown of expenses:

$16,000 son's total expenses including room/board, education, etc

$3,000 paid by son
$3,400 paid from scholarship
$5,200 paid from 529 plan ($3,200 basis plus $2,000 earnings)
$4,400 paid by us out of pocket

So, we only paid half of his support if we include the money that came from the 529 plan. Maybe we're only allowed to use the basis in the 529 plan for this purpose, which would give us $3,200 plus $4,400 equals $7,600, which is less than half of his support? Does anyone know the correct answer?
Why does everyone think you have to pay at least 1/2 of a childs expenses to claim them. That just not true! The rule states the child cannot provide more than 1/2 of their support. Suppose Grandma gives him money, or a sibling or a girlfriend. Thats fine. Who provided support during the summer or on breaks? Sounds to me like he did not pay 1/2.
I looked it up and found that you are right. As long as he lived with us at least half-time and did not provide more than half of his own support, we can claim him as a dependent. It seems odd to me, but that's what the rules say. I mean say for example he made $100,000 last year and saved $99,000 of it -- he could still be our dependent. Very interesting.

The 529 payments were made out to me, not my son. I'm still interested to know if anyone knows the question on whether the 529 earnings can be used in the parental support calculation. I can certainly see that the 529 basis should be included as parental support, because that is money that we his parents put into the 529. But I'm wondering if the earnings can't be included because they were never taxed.
A 10-20% allocation to gold has helped with the sequence of returns problem. Some gold held physically is also good insurance against the all-digital-assets problem.
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FiveK
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Re: Question About Claiming Son as Dependent

Post by FiveK »

stuper1 wrote: Sun Apr 18, 2021 5:57 pm The 529 payments were made out to me, not my son. I'm still interested to know if anyone knows the question on whether the 529 earnings can be used in the parental support calculation. I can certainly see that the 529 basis should be included as parental support, because that is money that we his parents put into the 529. But I'm wondering if the earnings can't be included because they were never taxed.
Not aware of any distinction between taxed vs. untaxed money when it comes to support. E.g., if you had received an untaxed inheritance and used that to pay bills, surely that would count as support. Same would go for 529 earnings.
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Re: Question About Claiming Son as Dependent

Post by gobel »

Just a reminder, I think that kiddie tax rules are independent of whether the student is a dependent or not. So in this case, since the student earned 16k which is more than 1/2 his support, he doesn't have to worry about kiddie tax (even if he didn't spend his own money). That opens up ~36k of 0% LTCG space for example.
HereToLearn
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Re: Question About Claiming Son as Dependent

Post by HereToLearn »

gobel wrote: Mon Apr 19, 2021 12:39 pm Just a reminder, I think that kiddie tax rules are independent of whether the student is a dependent or not. So in this case, since the student earned 16k which is more than 1/2 his support, he doesn't have to worry about kiddie tax (even if he didn't spend his own money). That opens up ~36k of 0% LTCG space for example.
This entire topic is so confusing.

You have raised another question in my mind. You mentioned that b/c the student earned more than half his support, he can now take advantage of the 0% capital gains space.

Does a dependent need to have earned half his support in order to take advantage of this space? Suppose my college-aged son who I support completely earns $16K this year and has some LTCG he could harvest. Would he be allowed to even though he does not provide any of his own support?

I am asking hypothetically since he does not have any investments, so we will ignore the fact that earning $16K wouldn't get him to 50% support anyway since his COA will be $75K.

And I am still uncertain how the use of a 529 plan to pay for his tuition, R&B is considered. Since I plan to claim him as a dependent to preserve my HOH filling status, I am hoping that my use of the 529 plan means that I supported him.
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stuper1
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Re: Question About Claiming Son as Dependent

Post by stuper1 »

HereToLearn wrote: Mon Apr 19, 2021 12:55 pm
gobel wrote: Mon Apr 19, 2021 12:39 pm Just a reminder, I think that kiddie tax rules are independent of whether the student is a dependent or not. So in this case, since the student earned 16k which is more than 1/2 his support, he doesn't have to worry about kiddie tax (even if he didn't spend his own money). That opens up ~36k of 0% LTCG space for example.
This entire topic is so confusing.

You have raised another question in my mind. You mentioned that b/c the student earned more than half his support, he can now take advantage of the 0% capital gains space.

Does a dependent need to have earned half his support in order to take advantage of this space? Suppose my college-aged son who I support completely earns $16K this year and has some LTCG he could harvest. Would he be allowed to even though he does not provide any of his own support?

I am asking hypothetically since he does not have any investments, so we will ignore the fact that earning $16K wouldn't get him to 50% support anyway since his COA will be $75K.

And I am still uncertain how the use of a 529 plan to pay for his tuition, R&B is considered. Since I plan to claim him as a dependent to preserve my HOH filling status, I am hoping that my use of the 529 plan means that I supported him.
In regard to using the 529 plan to support him, I think you are fine. As mentioned above, the question is: did he provide more than half of his own support? As long as he didn't pay for more than half of his expenses, including room/board/tuition/etc., then he can be your dependent. It doesn't matter where the actual support came from (e.g., parents, grandparents, 529 plan, etc.), as long as he didn't pay for at least half. I was still confused on this when I asked my last question about 529 basis versus earnings. It's really irrelevant as long as he didn't pay for at least half.
A 10-20% allocation to gold has helped with the sequence of returns problem. Some gold held physically is also good insurance against the all-digital-assets problem.
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Re: Question About Claiming Son as Dependent

Post by an_asker »

DIFAR31 wrote: Sun Apr 18, 2021 2:35 pm
an_asker wrote: Sun Apr 18, 2021 2:14 pm
Metsfan91 wrote: Sat Apr 17, 2021 11:18 pm [...]
Your son will have to file tax return whether you claim him as a dependent or not.

Yes, you can claim your son as a dependent. Just because you can claim doesn't mean you should or you have to. What would be your benefit for claiming him as your dependent?
[...]
There is not much benefit to claiming son as dependent; on the contrary, doing so directly means that son will have to pay more in taxes than he otherwise would. Why? Because he will be dinged at your (parent's) tax rate.

But that is the law. I learned this from an earlier thread on this very forum.

PS: I cannot say anything about the advantage on state income taxes as FL has none
1. Claiming a child as a tax dependent can be beneficial to the parent in that the child tax credit or credit for other dependents may be available.
It wasn't to us; besides, he missed out on the stimulus money he could've claimed which was way more than the $500 we got as "other dependent tax credit."
2. A child who files his own tax return and who is claimed as a dependent on a parent tax return will not necessarily "have to pay more in taxes than he otherwise would." This will only come into play if the child has unearned income (using the kiddie tax definition of that term) over a certain amount.
Maybe I have to sit with DS and scrutinize his taxes. For some reason, I got the impression that his taxes summed up to way more than they should, based on my understanding of what he earned. And if he earned that so much that the tax represents a lower fraction than I thought it did, then maybe he is independent :-)

He only had a scholarship - I don't think he ought to be paying taxes on that.
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Re: Question About Claiming Son as Dependent

Post by an_asker »

SimonJester wrote: Sun Apr 18, 2021 5:56 pm
an_asker wrote: Sun Apr 18, 2021 2:14 pm There is not much benefit to claiming son as dependent; on the contrary, doing so directly means that son will have to pay more in taxes than he otherwise would. Why? Because he will be dinged at your (parent's) tax rate.
The AOTC is a huge benefit to the parents if they qualify otherwise...
AOTC has income limits.
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Re: Question About Claiming Son as Dependent

Post by DIFAR31 »

an_asker wrote: Mon Apr 19, 2021 7:38 pm
DIFAR31 wrote: Sun Apr 18, 2021 2:35 pm
an_asker wrote: Sun Apr 18, 2021 2:14 pm
Metsfan91 wrote: Sat Apr 17, 2021 11:18 pm [...]
Your son will have to file tax return whether you claim him as a dependent or not.

Yes, you can claim your son as a dependent. Just because you can claim doesn't mean you should or you have to. What would be your benefit for claiming him as your dependent?
[...]
There is not much benefit to claiming son as dependent; on the contrary, doing so directly means that son will have to pay more in taxes than he otherwise would. Why? Because he will be dinged at your (parent's) tax rate.

But that is the law. I learned this from an earlier thread on this very forum.

PS: I cannot say anything about the advantage on state income taxes as FL has none
1. Claiming a child as a tax dependent can be beneficial to the parent in that the child tax credit or credit for other dependents may be available.
It wasn't to us; besides, he missed out on the stimulus money he could've claimed which was way more than the $500 we got as "other dependent tax credit."
Understood; that's why I used the modifiers "can" and "may." I believe that neither you nor I knows whether OP might benefit tax-wise by claiming a child as a tax dependent.
2. A child who files his own tax return and who is claimed as a dependent on a parent tax return will not necessarily "have to pay more in taxes than he otherwise would." This will only come into play if the child has unearned income (using the kiddie tax definition of that term) over a certain amount.
Maybe I have to sit with DS and scrutinize his taxes. For some reason, I got the impression that his taxes summed up to way more than they should, based on my understanding of what he earned. And if he earned that so much that the tax represents a lower fraction than I thought it did, then maybe he is independent :-)

He only had a scholarship - I don't think he ought to be paying taxes on that.
Scholarships that aren't used for qualified education expenses, like room and board, are taxable to the recipient. You should be aware that taxable scholarships are treated by the IRS as earned income when calculating the standard deduction for a tax dependent (this is good), but they are treated as unearned income when calculating the kiddie tax, if applicable (this is not good).
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Re: Question About Claiming Son as Dependent

Post by InMyDreams »

Colorado TaxAide Dependency Calculator
https://cotaxaide.org/tools/Dependent%2 ... lator.html

Be very careful to select buttons or boxes appropriately. If recalculating, be sure to use the reset button first.

IRS Pub 4012 page for Worksheet for Determining Support
https://www.irs.gov/pub/irs-pdf/p4012.pdf
newacct
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Re: Question About Claiming Son as Dependent

Post by newacct »

an_asker wrote: Mon Apr 19, 2021 7:38 pm
DIFAR31 wrote: Sun Apr 18, 2021 2:35 pm 1. Claiming a child as a tax dependent can be beneficial to the parent in that the child tax credit or credit for other dependents may be available.
It wasn't to us; besides, he missed out on the stimulus money he could've claimed which was way more than the $500 we got as "other dependent tax credit."
Choosing to not claim him as a dependent would not have allowed him to be eligible for the stimulus money, because he is ineligible as long as someone can claim him as a dependent, even if no one actually does. So his missing out on the stimulus has nothing to do with your choice to claim him or not.
HereToLearn
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Re: Question About Claiming Son as Dependent

Post by HereToLearn »

newacct wrote: Mon Apr 19, 2021 10:33 pm
an_asker wrote: Mon Apr 19, 2021 7:38 pm
DIFAR31 wrote: Sun Apr 18, 2021 2:35 pm 1. Claiming a child as a tax dependent can be beneficial to the parent in that the child tax credit or credit for other dependents may be available.
It wasn't to us; besides, he missed out on the stimulus money he could've claimed which was way more than the $500 we got as "other dependent tax credit."
Choosing to not claim him as a dependent would not have allowed him to be eligible for the stimulus money, because he is ineligible as long as someone can claim him as a dependent, even if no one actually does. So his missing out on the stimulus has nothing to do with your choice to claim him or not.
I think that a surprising number of parents and college students have done just this, even though I completely agree with you that it is wrong.
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teen persuasion
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Re: Question About Claiming Son as Dependent

Post by teen persuasion »

DIFAR31 wrote: Mon Apr 19, 2021 8:47 pm
an_asker wrote: Mon Apr 19, 2021 7:38 pm
DIFAR31 wrote: Sun Apr 18, 2021 2:35 pm
an_asker wrote: Sun Apr 18, 2021 2:14 pm
Metsfan91 wrote: Sat Apr 17, 2021 11:18 pm [...]
Your son will have to file tax return whether you claim him as a dependent or not.

Yes, you can claim your son as a dependent. Just because you can claim doesn't mean you should or you have to. What would be your benefit for claiming him as your dependent?
[...]
There is not much benefit to claiming son as dependent; on the contrary, doing so directly means that son will have to pay more in taxes than he otherwise would. Why? Because he will be dinged at your (parent's) tax rate.

But that is the law. I learned this from an earlier thread on this very forum.

PS: I cannot say anything about the advantage on state income taxes as FL has none
1. Claiming a child as a tax dependent can be beneficial to the parent in that the child tax credit or credit for other dependents may be available.
It wasn't to us; besides, he missed out on the stimulus money he could've claimed which was way more than the $500 we got as "other dependent tax credit."
Understood; that's why I used the modifiers "can" and "may." I believe that neither you nor I knows whether OP might benefit tax-wise by claiming a child as a tax dependent.
2. A child who files his own tax return and who is claimed as a dependent on a parent tax return will not necessarily "have to pay more in taxes than he otherwise would." This will only come into play if the child has unearned income (using the kiddie tax definition of that term) over a certain amount.
Maybe I have to sit with DS and scrutinize his taxes. For some reason, I got the impression that his taxes summed up to way more than they should, based on my understanding of what he earned. And if he earned that so much that the tax represents a lower fraction than I thought it did, then maybe he is independent :-)

He only had a scholarship - I don't think he ought to be paying taxes on that.
Scholarships that aren't used for qualified education expenses, like room and board, are taxable to the recipient. You should be aware that taxable scholarships are treated by the IRS as earned income when calculating the standard deduction for a tax dependent (this is good), but they are treated as unearned income when calculating the kiddie tax, if applicable (this is not good).
I believe only the portion of scholarships used for tuition is nontaxable. Room and board is not included here (though they are qualified educational expenses for AOTC purposes).
Last edited by teen persuasion on Tue Apr 20, 2021 12:22 pm, edited 1 time in total.
DIFAR31
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Re: Question About Claiming Son as Dependent

Post by DIFAR31 »

teen persuasion wrote: Tue Apr 20, 2021 7:23 am
DIFAR31 wrote: Mon Apr 19, 2021 8:47 pm
an_asker wrote: Mon Apr 19, 2021 7:38 pm
DIFAR31 wrote: Sun Apr 18, 2021 2:35 pm
an_asker wrote: Sun Apr 18, 2021 2:14 pm
There is not much benefit to claiming son as dependent; on the contrary, doing so directly means that son will have to pay more in taxes than he otherwise would. Why? Because he will be dinged at your (parent's) tax rate.

But that is the law. I learned this from an earlier thread on this very forum.

PS: I cannot say anything about the advantage on state income taxes as FL has none
1. Claiming a child as a tax dependent can be beneficial to the parent in that the child tax credit or credit for other dependents may be available.
It wasn't to us; besides, he missed out on the stimulus money he could've claimed which was way more than the $500 we got as "other dependent tax credit."
Understood; that's why I used the modifiers "can" and "may." I believe that neither you nor I knows whether OP might benefit tax-wise by claiming a child as a tax dependent.
2. A child who files his own tax return and who is claimed as a dependent on a parent tax return will not necessarily "have to pay more in taxes than he otherwise would." This will only come into play if the child has unearned income (using the kiddie tax definition of that term) over a certain amount.
Maybe I have to sit with DS and scrutinize his taxes. For some reason, I got the impression that his taxes summed up to way more than they should, based on my understanding of what he earned. And if he earned that so much that the tax represents a lower fraction than I thought it did, then maybe he is independent :-)

He only had a scholarship - I don't think he ought to be paying taxes on that.
Scholarships that aren't used for qualified education expenses, like room and board, are taxable to the recipient. You should be aware that taxable scholarships are treated by the IRS as earned income when calculating the standard deduction for a tax dependent (this is good), but they are treated as unearned income when calculating the kiddie tax, if applicable (this is not good).
I believe only the portion of scholarships used for tuition is nontaxable. Room and board is not included here (though they are qualified educational expenses for AOTC purposes).
A scholarship is nontaxable if it is used for:
-Tuition and fees required to enroll at or attend an eligible educational institution; and
-Course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. These items must be required of all students in your course of instruction.

Room and board are not qualified expenses for the AOTC. You may be thinking of expenses paid using dollars from a 529 account. This can be confusing, because the IRS uses different definitions of the term "qualified education expenses" depending on which part of the IRC is at issue.
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teen persuasion
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Re: Question About Claiming Son as Dependent

Post by teen persuasion »

DIFAR31 wrote: Tue Apr 20, 2021 10:04 am
teen persuasion wrote: Tue Apr 20, 2021 7:23 am
DIFAR31 wrote: Mon Apr 19, 2021 8:47 pm
an_asker wrote: Mon Apr 19, 2021 7:38 pm
DIFAR31 wrote: Sun Apr 18, 2021 2:35 pm

1. Claiming a child as a tax dependent can be beneficial to the parent in that the child tax credit or credit for other dependents may be available.
It wasn't to us; besides, he missed out on the stimulus money he could've claimed which was way more than the $500 we got as "other dependent tax credit."
Understood; that's why I used the modifiers "can" and "may." I believe that neither you nor I knows whether OP might benefit tax-wise by claiming a child as a tax dependent.
2. A child who files his own tax return and who is claimed as a dependent on a parent tax return will not necessarily "have to pay more in taxes than he otherwise would." This will only come into play if the child has unearned income (using the kiddie tax definition of that term) over a certain amount.
Maybe I have to sit with DS and scrutinize his taxes. For some reason, I got the impression that his taxes summed up to way more than they should, based on my understanding of what he earned. And if he earned that so much that the tax represents a lower fraction than I thought it did, then maybe he is independent :-)

He only had a scholarship - I don't think he ought to be paying taxes on that.
Scholarships that aren't used for qualified education expenses, like room and board, are taxable to the recipient. You should be aware that taxable scholarships are treated by the IRS as earned income when calculating the standard deduction for a tax dependent (this is good), but they are treated as unearned income when calculating the kiddie tax, if applicable (this is not good).
I believe only the portion of scholarships used for tuition is nontaxable. Room and board is not included here (though they are qualified educational expenses for AOTC purposes).
A scholarship is nontaxable if it is used for:
-Tuition and fees required to enroll at or attend an eligible educational institution; and
-Course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. These items must be required of all students in your course of instruction.

Room and board are not qualified expenses for the AOTC. You may be thinking of expenses paid using dollars from a 529 account. This can be confusing, because the IRS uses different definitions of the term "qualified education expenses" depending on which part of the IRC is at issue.
:oops: Thank you for the correction. You are right that R&B aren't qualified expenses for AOTC. I'll go back and edit.

The point I was trying to make (poorly) is that using scholarships to pay for R&B makes that portion of any scholarship taxable income.
an_asker
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Re: Question About Claiming Son as Dependent

Post by an_asker »

newacct wrote: Mon Apr 19, 2021 10:33 pm
an_asker wrote: Mon Apr 19, 2021 7:38 pm
DIFAR31 wrote: Sun Apr 18, 2021 2:35 pm 1. Claiming a child as a tax dependent can be beneficial to the parent in that the child tax credit or credit for other dependents may be available.
It wasn't to us; besides, he missed out on the stimulus money he could've claimed which was way more than the $500 we got as "other dependent tax credit."
Choosing to not claim him as a dependent would not have allowed him to be eligible for the stimulus money, because he is ineligible as long as someone can claim him as a dependent, even if no one actually does. So his missing out on the stimulus has nothing to do with your choice to claim him or not.
I have already been educated (previous threads here) that there is no such thing as "choosing to claim someone as dependent or not"; either the kid is a dependent or he/she is not.

However, on this thread, it appeared that there is a way to fudge/recalculate the numbers whereby the kid can end up unclaimable as a dependent (at least one respondent showed the math). So, I will try to share our numbers - once I have DS's final numbers - and see if somehow we can do it as well!

One thing I do not understand is how the earned and unearned income results in different taxes. I will need to play out a couple of scenarios with DS - maybe later this month or early next month.
DIFAR31
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Re: Question About Claiming Son as Dependent

Post by DIFAR31 »

an_asker wrote: Tue Apr 20, 2021 1:38 pm
newacct wrote: Mon Apr 19, 2021 10:33 pm
an_asker wrote: Mon Apr 19, 2021 7:38 pm
DIFAR31 wrote: Sun Apr 18, 2021 2:35 pm 1. Claiming a child as a tax dependent can be beneficial to the parent in that the child tax credit or credit for other dependents may be available.
It wasn't to us; besides, he missed out on the stimulus money he could've claimed which was way more than the $500 we got as "other dependent tax credit."
Choosing to not claim him as a dependent would not have allowed him to be eligible for the stimulus money, because he is ineligible as long as someone can claim him as a dependent, even if no one actually does. So his missing out on the stimulus has nothing to do with your choice to claim him or not.
I have already been educated (previous threads here) that there is no such thing as "choosing to claim someone as dependent or not"; either the kid is a dependent or he/she is not.
There absolutely is such a thing as choosing to claim someone as a dependent or not. Just because a person can legitimately be claimed as a tax dependent on a taxpayer's return does not mean that the taxpayer must list that person in the Dependents section on page 1 of the 1040. In other words, and very simply, the taxpayer has a choice as to whether or not they will claim the person as a dependent.
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stuper1
Posts: 508
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Re: Question About Claiming Son as Dependent

Post by stuper1 »

I did some googling to see reasons why a person might not want to claim a dependent that they are entitled to claim.

One scenario is if your AGI is too high for the AOTC or Lifetime Learning Credit. Then, the student, if not claimed as a dependent, can likely claim the AOTC or LLC.

Another scenario is if you have an adult disabled child. If you don't claim them as a dependent, they may get more SSI or public assistance benefits.

That's all that I could find.

For people like me, whose AGI is below the AOTC limit, there doesn't seem any reason not to claim my son as a dependent.
A 10-20% allocation to gold has helped with the sequence of returns problem. Some gold held physically is also good insurance against the all-digital-assets problem.
SimonJester
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Re: Question About Claiming Son as Dependent

Post by SimonJester »

an_asker wrote: Mon Apr 19, 2021 7:39 pm
SimonJester wrote: Sun Apr 18, 2021 5:56 pm
an_asker wrote: Sun Apr 18, 2021 2:14 pm There is not much benefit to claiming son as dependent; on the contrary, doing so directly means that son will have to pay more in taxes than he otherwise would. Why? Because he will be dinged at your (parent's) tax rate.
The AOTC is a huge benefit to the parents if they qualify otherwise...
AOTC has income limits.
Correct which is why I said "if they qualify otherwise... "
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin
an_asker
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Re: Question About Claiming Son as Dependent

Post by an_asker »

DIFAR31 wrote: Tue Apr 20, 2021 2:20 pm
an_asker wrote: Tue Apr 20, 2021 1:38 pm
newacct wrote: Mon Apr 19, 2021 10:33 pm
an_asker wrote: Mon Apr 19, 2021 7:38 pm
DIFAR31 wrote: Sun Apr 18, 2021 2:35 pm 1. Claiming a child as a tax dependent can be beneficial to the parent in that the child tax credit or credit for other dependents may be available.
It wasn't to us; besides, he missed out on the stimulus money he could've claimed which was way more than the $500 we got as "other dependent tax credit."
Choosing to not claim him as a dependent would not have allowed him to be eligible for the stimulus money, because he is ineligible as long as someone can claim him as a dependent, even if no one actually does. So his missing out on the stimulus has nothing to do with your choice to claim him or not.
I have already been educated (previous threads here) that there is no such thing as "choosing to claim someone as dependent or not"; either the kid is a dependent or he/she is not.
There absolutely is such a thing as choosing to claim someone as a dependent or not. Just because a person can legitimately be claimed as a tax dependent on a taxpayer's return does not mean that the taxpayer must list that person in the Dependents section on page 1 of the 1040. In other words, and very simply, the taxpayer has a choice as to whether or not they will claim the person as a dependent.
OK maybe it is matter of semantics. Yes, I can choose not to claim DS as dependent.

But, he in turn, has to still say that he can be (i.e. is eligible to be) claimed as dependent - even if he is actually not claimed as dependent. When DS did that, the software asked him to enter our filing # and AGI, thereby bumping the taxes he owed. Feel free to reply on my thread where you see this very topic discussed.

PS: This doesn't mean folks haven't gotten away the other way; just that this is apparently the right legal way of doing things.
DIFAR31
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Re: Question About Claiming Son as Dependent

Post by DIFAR31 »

an_asker wrote: Tue Apr 20, 2021 3:29 pm
DIFAR31 wrote: Tue Apr 20, 2021 2:20 pm
an_asker wrote: Tue Apr 20, 2021 1:38 pm
newacct wrote: Mon Apr 19, 2021 10:33 pm
an_asker wrote: Mon Apr 19, 2021 7:38 pm
It wasn't to us; besides, he missed out on the stimulus money he could've claimed which was way more than the $500 we got as "other dependent tax credit."
Choosing to not claim him as a dependent would not have allowed him to be eligible for the stimulus money, because he is ineligible as long as someone can claim him as a dependent, even if no one actually does. So his missing out on the stimulus has nothing to do with your choice to claim him or not.
I have already been educated (previous threads here) that there is no such thing as "choosing to claim someone as dependent or not"; either the kid is a dependent or he/she is not.
There absolutely is such a thing as choosing to claim someone as a dependent or not. Just because a person can legitimately be claimed as a tax dependent on a taxpayer's return does not mean that the taxpayer must list that person in the Dependents section on page 1 of the 1040. In other words, and very simply, the taxpayer has a choice as to whether or not they will claim the person as a dependent.
OK maybe it is matter of semantics. Yes, I can choose not to claim DS as dependent.

But, he in turn, has to still say that he can be (i.e. is eligible to be) claimed as dependent - even if he is actually not claimed as dependent. When DS did that, the software asked him to enter our filing # and AGI, thereby bumping the taxes he owed. Feel free to reply on my thread where you see this very topic discussed.

PS: This doesn't mean folks haven't gotten away the other way; just that this is apparently the right legal way of doing things.
The amount of money he owed probably got "bumped" because he had enough unearned income that the kiddie tax kicked in, and some of that unearned income was taxed at your highest marginal rate.

As for semantics... you were very clear in stating that there is no choice in claiming someone as a dependent or not, and this is demonstrably false.
an_asker
Posts: 4903
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Re: Question About Claiming Son as Dependent

Post by an_asker »

DIFAR31 wrote: Tue Apr 20, 2021 4:01 pm
I have already been educated (previous threads here) that there is no such thing as "choosing to claim someone as dependent or not"; either the kid is a dependent or he/she is not.
[...]
The amount of money he owed probably got "bumped" because he had enough unearned income that the kiddie tax kicked in, and some of that unearned income was taxed at your highest marginal rate.

As for semantics... you were very clear in stating that there is no choice in claiming someone as a dependent or not, and this is demonstrably false.
Got it. Now I re-read what I wrote originally, my quote is incorrect! What I should have said (and what I was meaning to say :oops: ) was this:
"if parent has the option to claim the kid as a dependent, the latter has no choice but to say that he/she is eligible to be claimed as a dependent." Whether the parent does claim the kid as dependent or not is immaterial.
I hope we are on the same page on this :sharebeer
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