<p>Doing taxes (prelim, for FASFA) for us (married parents, living together, how about that) and daughter, a Sophomore. We claim her as a dependent. She, very lucky, had a summer job, earned $9K as a "contractor", 1099-misc box 7. So her taxes are $1500. Can we not claim her, she can then claim herself, and get a tax advantage?</p>
<p>she’s not married, she’s under 24, she’s not a vet, she’s not supporting a child,…she’s a dependent. </p>
<p>It doesn’t matter that she’s earned money and pays taxes.</p>
<p>I think the OP is asking what’s more advantageous, the parent claiming the child as an exemption, or the child claiming herself.</p>
<p>To the parent, the exemption is worth $3650 in 2010, with a phaseout above a certain AGI (around $250K). I’m guessing that unless you’ve hit the phaseout limit, it might be more valuable for you to claim the child as a dependent. </p>
<p>Can you run this as a what-if scenario in your tax program, if you have one?</p>
<p>Alternatively, can she contribute to an IRA to bring her AGI down?</p>
<p>
I believe the The OP is asking about taxes, not FAFSA. </p>
<p>Whether she can claim her own exemption for taxes, rather than you claiming her as a dependent, depends on her income and her other financial resources and her total expenses for the year. As a full time student aged under 24, to be claimed as your dependent under the qualifying child rules she must meet all the qualifying tests. Assuming she meets all the others, the one that is probably important here is the support test. If she provided more than half her own support for the year then she is not your dependent for tax purposes. If she did not provide more than half her own support she is your dependent for tax purposes.</p>
<p>Thanks everyone. If I don’t claim her and she claims herself, her taxes go down by $684. That’s not as good us parents claiming her, a $3,650. benefit. I suspect both ways are legal.</p>
<p>Um, the benefit to you is not $3650. You would get to take the dependent exemption of $3650 which means your taxable income (not your taxes) is reduced by $3650. How much you actually save in taxes would depend on your tax rate on that $3650. If your tax rate is 10% your savings would be $365. If your rate is higher, your saving will be higher.</p>
<p>Have you factored in the education tax credits?</p>
<p>You really do need to sit down and work your way through both options. Don’t forget to check the effect on state and/or local tax returns. If she didn’t need it all for expenses this year, your daughter could also consider stashing some of her money in a regular IRA and/or SEP IRA.</p>
<p>But aren’t you lucky to have this problem! Wow! Congratulations to your clever child for getting such a good summer job!</p>
<p>oops…misread.</p>
<p>can’t you do your taxes both ways and see which way is better?</p>