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My client & daughter just recently move back into the home of the parent/grandmother. So it's client, daughter & grandmother (3 generation) all under one roof. My clients' daughter turned 19 prior to end of 2019; however has been enrolled in college classes for "at least half time" (per 1098-T). The client have also attended college full time (degree program) to advance their career.
Everything seems good to claim daughter; however as I look at the incomes (due to daughter working full & client now going to school full-time); the income allocation has flipped where the daughter now makes more than my client. Now the question, did the student (19-year old daughter) provide over half of their own support. The student (daughter) made about $28,000. As mentioned both individuals live with the parent of my client, so everyone contributes to the upkeep & expenses of the household. At first I thought claiming daughter was valid but once I realized the incomes provided, I am now on the side of the client cannot claim daughter. Rather than giving a definite NO, I wanted to get some thoughts just in case I may have the incorrect interpretation of the rules/publication (970)
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There's a worksheet in Pub 17 you can go through to see if the daughter did, indeed, provide more than 1/2 of her own support. In the new Pub 17 it's on page 29.
Short version:
- Daughter's income -- $28k
- Amount of line 1 used for her own support
- Expenses for entire household (rent or fair rental value of home if owned, utilities, food, repairs, all other household expenses)
- Total number of persons in household -- 3
- Line 3 divided by line 4. This is the daughter's share of household expenses.
- Daughter's personal expenses (clothing, education, medical, travel, personal, etc.)
- Add lines 5 and 6. This is the cost of the daughter's support.
- Line 7 times 50%
- Is line 2 > line 8? If so, she's NOT a dependent. If not, since she meets the other tests to be a qualifying child (see below), she IS a dependent.
Tests to be a qualifying child: Relationship? Check. Age? Under 24 and full-time student, check. Residency? Check. Joint return? I'm assuming check, though you didn't say.
Pub 17 is your friend. Seriously.
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Of course Hillsboro has got the response covered. I'm just thinking if they are eligible for education credits not being able to claim the daughter as a dependent might actually be to all their benefit. Each file single, claim themselves and maximize the credit. In this case a NO is a good thing...
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Thanks so much for the feedback on this. As always, greatly appreciate the quick response.