Why did my federal refund go to $0 when I stated that I am a full-time student, even though I am filing independently?

If you are a dependent of someone, which you probably are since you are a full-time student, it is not your choice to file independently. While your parent can forgo claiming you, you do not have to right to claim benefits you are not entitled to.

There is a common idea that a parent can decide not to claim a dependent so that they can reap certain benefits. The truth is, a qualifying child or a qualifying relative is your dependent.

While the IRS never comes out and says that you must claim a dependent, they do give the definition of who is a dependent.

The term “dependent” means:

• A qualifying child, or
• A qualifying relative.

While you can choose not to claim your dependent, the qualifying person MUST indicate on his own return that he is a dependent, but that no one will actually claim him as such.

In TurboTax Online, the questions read:

Someone else can claim me as a dependent on their tax return. You would answer yes.

And this person will claim me on their 2021 tax return. You would answer no.

Sometimes a parent will not be able to take advantage of an Education Credit and will forgo claiming the dependent so that they can get the credit. This will not necessarily work out. A student, under the age of 24, must have a tax liability in order to claim the non-refundable portion of the credit.

When using the Interactive Tax Assistant that the IRS provides, you can be told that you are eligible, but can't take the refundable portion in any of the following circumstances.

You are eligible to claim the American Opportunity Credit.

However, you cannot claim any part of the American Opportunity Credit as a refundable credit on your tax return since:

• you were over age 18 and under age 24 at the end of 2021,
• you were a full-time student,
• your earned income was less than one-half of your support,
• at least one of your parents was alive at the end of 2021, and
• you are not filing a joint return.

[Edited 2/26/2022|9:47AM PST]

Nobody else has claimed me as a dependent because I decided to file independently.

You don't have the choice here. But your parent's do. Here's the rules and simplified as I can make them.

If the student:

 - Was under the age of 24 on Dec 31 of the tax year, and;

-Was at least a half time student and;

- Was enrolled in an accredited institution and;

- Was enrolled in a program that will lead to a degree or credentialed certification and;

- Did not provide more than half of their own supprt (3rd party income does not count for this) then;

The parents qualify to claim the student as their dependent. Period. End of Story.

Now some further clarification.

Scholarships, grants, 529 distributions, gifts from Aunt Mary, money from parents, etc. do not count for the student providing more than half of their own support. There are only two possible ways the student can justify any claim to providing more than half of their own support.

1) The student was self-employed or had a W-2 job and earned enough money to justify their claim to providing more than half of their own support. Additionally, the money earned by the student must be more than the total of all 3rd party support received during the year. This includes scholarships, grants, 529 distributions, and all other money received from any other third party source.

2) The student was the primary borrower on a qualified student loan and sufficient funds were distributed to the student during the tax year to justify their claim to providing more than half of their own support. Additionally, the total amount distributed must be more than the total of all 3rd party support (defined above) received during the tax year.

Now for "cost of support".  Support costs must be reasonable. For example, no $5000/mo penthouse suites. That's not gonna cut it with the IRS. For a few things, there are limits.

- Your housing costs (the "room" part of room and board) are what is paid to the college for on-campus housing. If you live off-campus, the amount you claim can not exceed what it would cost you to live on campus. Additionally, the costs must be "in direct support" of the education. For example, if you do not enroll for the summer semester (generally June-July) then the housing costs are not in direct support of the education and can't be claimed as such.

- Your food costs may be limited also. If the college offers a "meal plan" (and many do) and you have elected to live off campus, then when you claim for food (the "board" part of room and board) is limited to what the college charges for their meal plan that would apply to you, if you lived on campus.

The only exceptions to the above two items, would be if you were issued a letter (for each semester) informing you that on campus housing was not available. Then your costs would not be limited, but they do have to be reasonable. So again, no $5000/mo penthouse suites or steak and lobster for lunch and dinner every day.

Now some other things I"m sure are coming to mind.

- There is no requirement for the parents to provide the student any support. Not one single penny. The support requirement is on the student, and "only" the student.

- As for as the IRS is concerned, in many cases the student lived with the parent the entire tax year. That's because the IRS considers time spent away from home for the purpose of attending school, as time having lived with the parents.

Now, when it comes to dependent status, the key word in the rule is "QUALIFY". If the parent's "qualify" to claim the student as a dependent, and the student is required to file a tax return, then the student must select the option for "I can be claimed on someone else's tax return". It does not matter if the parents actually claim the student or not.

If the parents qualify to claim the student, then the parents have a choice.

The student does not have a choice.

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