Scholarship tax credit

Forum|Forum|3 years ago
April 3, 2023
2 replies
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My child was a full time student graduated in May 2022. I have gotten the American Opportunity Credit for the previous 3 years. This year she had her first job and has about $14k in taxable income. Can I, How do I add the tax credit from the 1098-t to my and my wife's taxes? Can I still claim my child as a dependent? And then on her tax return select: someone else can claim you as a dependent? Is it that easy?

I feel like I'm missing something.

Thanks in advance for any help I can get.

KrisD15

If you can claim her as your dependent, you can claim the education credit (if all other requirements are met).

If she was under 24 in 2022, and went to school for at least part of at least 5 months, she would be considered a student.

How much she earned is irrelevant. What matters is "Did she supply more than half her own support for 2022?"

If she did, you can't claim her.

If she didn't, you can claim her.

Yes, if you are claiming her, she selects "Some else can and will claim me"

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Hal_Al

Employee

Q. Can I still claim my child as a dependent?

A. Yes, most likely. See below.

Q. And then on her tax return select: someone else can claim you as a dependent? Is it that easy?

A. Yes.

Can the student be claimed as a dependent in the Graduation year?

If he/she was a student (under 24) for at least 5 months and lived with you for more than half the year, and did not provide more than 1/2 his own support for the whole year, you can still claim him. Be sure he knows you're claiming him, so he doesn't claim himself. He can only be claimed once. But, he can "file taxes" without claiming his own exemption.

The real question is who should be claiming him in this "transition" year to adulthood. You two have to agree on who is going to claim his exemption. Each should do their taxes both ways and see which way the family comes out best. Even then, you have to meet the rules.

There are two types of dependents, "Qualifying Children"(QC) and Other ("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.

The rule is that a child of a taxpayer can still be a “Qualifying Child” dependent, regardless of his income, if:

he is a full-time student under 24 for at least 5 calendar months of the year (graduating in May usually means you meet the 5 month rule)
he did not provide more than 1/2 his own support (scholarships are considered 3rd party support and not support provided by the student).
lived with the parent (including time away at school) for more than half the year

So, it usually hinges on "Did he provide more than 1/2 his own support in 2022.

The support value of the home you provided is the fair market rental value of the home plus utilities & other expenses divided by the number of occupants. IRS Publication 501 on page 20 has a worksheet that can be used to help with the support calculation. See: http://www.irs.gov/pub/irs-pdf/p501.pdf (page 15)