<p>It’s all in how you answer the questions. Turbo Tax should ask the question of whether she can be claimed by another taxpayer.</p>
<p>From page 10 of IRS Publication 501:</p>
<p>
This is why it bothers me to hear families discussing “which way is more beneficial” as the rules are pretty cut and dried.</p>
<p>To determine if she can be claimed by the parents, see Qualifying Child" on page 11 & 12. There are 5 tests:</p>
<p>1 - relationship, which she passes as their child
2 - age, which she passes as a full time student under 24
3 - Residency, lived with you more than half the year (note that living at schools is considered a temporary absence, not moving out, particularly if the “home of record” is the parents’ home).
4 - Support - did she provide less than half of her own support (she could fail this if she takes out significant loans in her name only and works during the summer - scholarships don’t play into the equation)
5 - Joint return - she isn’t filing a joint return with her own spouse (who supports them both).</p>
<p>Again, if they (or any other relative who lives with her/them) are allowed to claim her, she cannot claim herself.</p>