I am trying to find out if withdrawals from a 529 plan can be considered part of the of 50% expenses threshold in order for a college student to file their own tax return and be able to take there own standard deduction. With the new standard deduction amounts and our income making it not worthwhile to even claim my daughter as a dependent, it make may more sense for her to file her own tax return without us claiming her as a dependent. However, I believe in order for her to answer the question can anyone else claim you as a dependent, she has to provide over 50% of her own support. She has her own W2 where some federal taxes were with held that she would be able to have refunded if she could consider herself independent for taxes. She would not meet the 50% threshold unless her 529 withdrawals are considered to count towards providing her own support. I have tried to figure this out but have not found much out there on this topic. I am not concerned about how this applies to financial aid because we do not receive need based aid.
If you are the owner of the 529, then it is support given by you.
She can file her own tax return and take the standard deduction whether or not she is your dependent
The standard deduction for a dependent is the smaller of $12k or earned income plus $350. If all of her income is from wages, and she’d get a full refund if she weren’t dependent, she’ll get a full refund if she is dependent.
That wasn’t necessarily the case in prior years, but it is now.
She gets the standard deduction, and if you claim her as a dependent, you may get a $500 credit. Finally, an IRS win/win.
Ok thanks for the answers. That helps understand it somewhat, I was unsure because the tax statement for the 529 came in her name and not mine.