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Is there any advantage to claiming my college student on 2018 tax return with the loss of dependent exemptions?

Forum|Forum|7 years ago
June 5, 2019
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My daughter received stocks from her grandfather to help pay for college. With the change in tax law, my understanding is we will no longer receive exemptions for dependent children. Therefore, I'm wondering if it makes more sense for her to file independently in order to minimize capital gains tax that will be triggered as she cashes out stocks. If so, and if we continue to pay tuition (while she pays living expenses), do we qualify for the education credit if she is no longer a dependent on our tax return?

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Best answer by Hal_Al

Yes. The exemption deduction has been replaced by a $500 non-child dependent tax credit. There is also an education credit or deduction when your dependent is a student. You may NOT claim the education credit, even if you pay the tuition, if she is not claimed as a dependent on your return. As others have mentioned, a student child, under age 24, may make you eligible for the Earned Income credit.

Just as important are the dependent rules. She is not allowed to file as "independent" ("claim herself") if she qualifies, under the rules, as your dependent.

See dependent rules at

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

Your should also be aware of changes to the "Kiddie tax". A student under 24, who does not support herself by working, is subject to capital gains being taxed at trust tax rates (beginning in 2018) regardless of dependent status.

See https://www.marketwatch.com/story/the-kiddie-tax-is-getting-easier-and-maybe-cheaper-under-the-new-t...

https://www.kiplinger.com/article/taxes/T054-C005-S001-capital-gains-and-the-kiddie-tax-under-the-ne...

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