Child is full time grad school student

Q.  Can the parent claim them as a dependent for tax year 2020?

A. Yes*, if they are under 24 on 12-31-20.  Otherwise no*.

Q. Should parent claim them as a dependent?

A. It's not optional. If the student can be claimed, he must check the box, on his return, that says he can be claimed.

Q.  Will they be able to write off their student loans and claim the college expense deductions when they have income?

A. No. The student loan interest deduction is of no use since there is no income to deduct from.  For grad students, there is no refundable tuition credit. So, again, no income  = no income tax = not tax to take a credit against.

Q. Can the student get the stimulus payment by filing a 2020 return.  

A. Yes, if he cannot be a dependent.  No, if he can, even if he isn't actually claimed.

*There are two types of dependents, "Qualifying Children"(QC) and standard ("Qualifying Relative" in IRS parlance even though they don't have to actually be related). There is no income limit for a QC but there is an age limit, student status, a relationship test and residence test. Only a QC qualifies a taxpayer for the Earned Income Credit and the Child Tax Credit. They are interrelated but the rules are different for each.

The support test is different for each type. The support test, for a QC, is only that the child didn't provide more than half his own support. The support test for a Qualifying Relative is that the taxpayer provided more than half the relative's support.

A child of a taxpayer can still be a “Qualifying Child” (QC) dependent, regardless of his/her income, if:

1. He is under age 19, or under 24 if a full time student for at least 5 months of the year, or is totally & permanently disabled
2. He did not provide more than 1/2 his own support. Scholarships are considered third party support and not as support provided by the student. Loans are his own support, unless the parent co-signed.
3. He lived with the parent (including temporary absences such as away at school) for more than half the year

So, for a QC, it doesn't matter how much he earned. What matters is how much he spent on support. Money he put into savings does not count as support he spent on him self.

The support value of the home, provided by the parent, is the fair market rental value of the home plus utilities & other expenses divided by the number of occupants.

The IRS has a worksheet that can be used to help with the support calculation. See: http://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf

A person can still be a Qualifying relative dependent, if not a Qualifying Child, if he meets the 6 tests for claiming a dependent:

1. Closely Related OR live with the taxpayer ALL year
2. His/her gross taxable income for the year must be less than $4300 (2020).
3. The taxpayer must have provided more than 1/2 his support

In either case:

4. He must be a US citizen or resident of the US, Canada or Mexico
5. He must not file a joint return with his spouse or be claiming a dependent of his own
6. He must not be the qualifying child of another taxpayer