If she was a full time student in 2016, then her income is not relevant in claiming her as your dependent.
Go back and review your answers in the Personal Info section for dependents. Make sure that you indicated that the dependent lived in your home for the whole year. A student away from home temporarily for education is considered living in the home. Make sure that you indicated that the dependent did NOT provide over one-half of their own support. Make sure that you indicated the dependent was a Full Time Student. Make sure that you indicated that there was no one else in the household supporting the dependent. If you answered these questions correctly the program does not even ask about the dependent's income.
After review, if the dependent is still not being listed as your dependent then delete them from the dependent section and re-enter.
Claiming the student as a dependent allows you to claim their personal exemption. It also allows you to claim any education expenses and any education credits on your tax return for the student. The Form 1098-T can only be entered on your tax return when claiming the student as your dependent.
Additionally, if her earned income is being reported on a W-2 and the amount is $6,300 or more and you are claiming her as a dependent, then she must file a tax return. When she files a tax return she Must indicate on her tax return that she can be claimed as a dependent on someone else's tax return.
These are the Qualifying Child rules for dependency -
To be a Qualifying Child -
1. The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them.
2. The child must be (a) under age 19 at the end of the year, (b) under age 24 at the end of the year and a full-time student or (c) any age and permanently and totally disabled.
3. The child must have lived with you for more than half of the year. Temporary absences while away at college are considered living with you.
4. The child must not have provided more than half of his or her own support for the year.
5. 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.
6. The child must be a U.S. citizen or U.S., Canada or Mexico resident for some portion of the year.
7. The child must be younger than you unless disabled.
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