IRS Guidelines for Claiming College Dependents

• admin
• February 16, 2025
• 6 min read

Understanding IRS Claiming Dependent Rules

Qualifying as a Dependent: The Basics

To claim a college student as a dependent, the Internal Revenue Service (IRS) outlines specific tests under the “qualifying child” criteria:

1. Relationship Test: The student must be your child, stepchild, foster child, sibling, stepsibling, or a descendant of any of them.
2. Age Test: The student must be under 19 at the end of the year, or under 24 if a full-time student. There’s no age limit if the individual is permanently and totally disabled.
3. Residency Test: The student must have lived with you for more than half of the tax year. Temporary absences, such as time away at school, are generally counted as time lived with you.
4. Support Test: You must provide more than half of the student’s total financial support during the year. This includes expenses like housing, food, tuition, and other necessities.
5. Joint Return Test: The student must not file a joint return for the year unless it’s solely to claim a refund of withheld income tax or estimated tax paid.

Understanding Full-Time Student Status

The IRS defines a full-time student, who can be considered a qualifying child or qualifying relative, as someone enrolled in an educational institution for the number of hours or courses the institution considers full-time during some part of at least five calendar months of the year. This includes colleges, universities, technical schools, and other post-secondary institutions.

Financial Support: A Closer Look

Determining who provides more than half of the student’s support can be complex, especially when calculating for multiple dependents, and can also affect tax deductions and potential exemption eligibility. Support includes amounts spent on food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities, which can impact eligibility for the child tax credit. Scholarships received by the student are generally not considered as support provided by the student.

Tax Benefits of Claiming a College Student as a Dependent

Claiming your college student as a dependent can make you eligible for several tax benefits, including tax deductions and the child tax credit, but it’s important to understand the IRS claiming dependent rules as outlined in Publication 501:

• American Opportunity Tax Credit (AOTC): Offers a credit of up to $2,500 per eligible student for qualified education expenses during the first four years of higher education. To be eligible, the student must be pursuing a degree or other recognized education credential and enrolled at least half-time for at least one academic period during the tax year.
• Lifetime Learning Credit (LLC): Provides a credit of up to $2,000 per tax return for qualified tuition and related expenses. Unlike the AOTC, the LLC is available for all years of post-secondary education and for courses to acquire or improve job skills. If any discrepancies are found in the initial filing, an amended return may be necessary to correct the claimed amount.

Common Misconceptions

• Student’s Income: A common misconception is that if a student earns income, they cannot be claimed as a dependent. In reality, a student can earn income and still be claimed as a dependent, provided they do not provide more than half of their own support.
• Filing a Tax Return and Filing Requirements: Even if your dependent student is required to file their own tax return due to income thresholds, you can still claim them as a dependent on your return, as long as all dependency tests and filing status requirements are met.

Special Considerations for Divorced or Separated Parents

In situations where parents are divorced or separated, the custodial parent (the parent with whom the child lived for the greater part of the year) is generally entitled to claim the qualifying child as a dependent, provided the child meets the criteria of a qualifying relative, and the dependency rules are followed. However, the custodial parent can release this claim to the noncustodial parent by providing a written declaration, such as Form 8332, allowing the noncustodial parent to claim the child as a dependent.

Frequently Asked Questions

Q1: Can I claim my child as a dependent if they receive a scholarship?

A: Yes, scholarships generally do not count as the student’s support. As long as you provide more than half of the student’s remaining support and meet other dependency tests, you can claim them as a dependent.

Q2: My child worked part-time during college. Can I still claim them as a dependent on my tax return, considering IRS claiming dependent guidelines?

A: Yes, as long as your child does not provide more than half of their own support and meets the other qualifying tests, you can claim them as a dependent. For detailed guidelines, refer to IRS Publication 504.

Q3: What if my child took a gap year?

A: If your child is under 19 at the end of the year, they can still qualify as a dependent. If they are 19 or older, they must be a full-time student for at least five months of the year to qualify as a qualifying relative under the age test.

Key Takeaways for Maximizing Your Tax Benefits

• Age and Student Status: Dependents who are full-time students under 24 may qualify, potentially allowing you to claim the child tax credit.
• Residency Requirement: The student must live with you for more than half the year.
• Financial Support: You must provide more than half of the student’s financial support.

For more information on tax extensions, filing requirements, and filing, visit FileLater.com.