Claiming a Qualified grandchild as a dependent who earned Unemployment over 16K

Forum|Forum|4 years ago
February 4, 2022
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I want to claim my granddaughter as a dependent for 2021. She was under 24 and a full-time student, however, because she received 16K in unemployment, she does not qualify as a dependent (in the Turbo-Tax program). As a result, I cannot claim the Education tax credit, even though I paid for her tuition and expenses.

Is there any way around this?

I saw posts that said she qualifies no matter the income. TurboTax limits it to $4300

thank you for your answer.

Best answer by Hal_Al

Because she was 24, at the end of the year, (12/31/21) she can NOT be a Qualifying Child. If she had over $4300, of income, she cannot be a Qualifying relative, either. Unemployment is taxable income. So, she cannot be your dependent for 2021.

Hal_Al

Employee

@joepaccia said "I saw posts that said she qualifies no matter the income."

Yes, if she lived with you for more than half the year.

If TurboTax limits income to $4300, you have entered something wrong, most likely the amount of time she lived with you.

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 closely related to a taxpayer can be a “Qualifying Child (QC)” dependent, regardless of the child's income, if:

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
He did not provide more than 1/2 his own support. Scholarships are excluded from the support calculation
He lived with the relative (including temporary absences) for more than half the year
He is younger than the relative (not applicable for a disabled child)
If the child meets the rules to be a qualifying child of more than one person, you must be the person entitled to claim the child as a qualifying child (this essentially means that you have the parent’s permission to claim the child, if the child also lived with the parent more than half the year)
If the parents of a child can claim the child as a qualifying child but no parent so claims the child, no one else can claim the child as a qualifying child unless that person's adjusted gross income (AGI) is higher than the highest AGI of any of the child's parents who can claim the child.

See full dependent rules at: https://turbotax.intuit.com/tax-tools/tax-tips/Family/Rules-for-Claiming-a-Dependent-on-Your-Tax-Return/INF12139.html

MAK70

To meet the qualifying child test, your granddaughter must be younger than you and either younger than 19 years old or be a "student" younger than 24 years old as of the end of the calendar year. If you did not indicate that she was a full time student, she would not qualify.

joepacciaAuthor

Thank you for your answers. It seems that I meet all the requirements except 2 gray areas:

1. Is a grandchild a QC? or a Qualifying Relative? A QC has no limit on income, but a QR is limited to $4300.

2. Even though a full time student, in her last year, she turned 24 on Dec 10, 2021. So, she was not under 24 as of 12/31/2021.

Would either of these disqualify her?

Hal_AlAnswer

Employee

joepacciaAuthor

This is the definition of a QC:

It seems that I meet these

Qualifying child

In addition to the qualifications above, to claim an exemption for your child, you must be able to answer "yes" to all of the following questions.

Are they related to you? The child can be your son, daughter, stepchild, eligible foster child, brother, sister, half brother, half sister, stepbrother, stepsister, adopted child or an offspring of any of them.
Do they meet the age requirement? Your child must be under age 19 or, if a full-time student, under age 24. There is no age limit if your child is permanently and totally disabled.
Do they live with you? Your child must live with you for more than half the year, but several exceptions apply.
Do you financially support them? Your child may have a job, but that job cannot provide more than half of her support.
Are you the only person claiming them? This requirement commonly applies to children of divorced parents. Here you must use the “tie breaker rules,” which are found in IRS Publication 501. These rules establish income, parentage and residency requirements for claiming a child.