Does dependent vs household member matter for financial aid

I have two in college. One will be graduating this year. I am aware that efc will double next year with only one in college but what about if he is no longer my dependent but still lives with me. Will that make a difference in financial aid?

I am about to fill out the fasfa and css profile for second child. School Meets full need. Older wants to claim himself this year because he had been hit hard by taxes and penalties for underpayment in the past because of dependent status. He has been working full time while going to school full time. He has his classes on two days and works the rest. This year he has earned close to $50,000 and is worried if I claim him about how much tax he will owe. Legally he is my dependent. I pay for school and he lives in my house and eats my food. I provide more than half his support and he is saving a good deal of money.

He will continue to be a member of my household after he graduates. But for 2018 estimates will it make a difference in how much financial aid second child receives if older child changes from dependent to just a member of the household. I would go from 4 dependents to 3 but still have 4 household members.

Would this affect financial aid? If so would it be by a lot? Older child would let me claim him as dependent if it would cause a big change in financial aid. Right now I am paying around $12000 for second child figuring it will double to around $24000 next year. Don’t think I can afford much more so need to figure out how losing a dependent even if he still lives at home will affect aid.

Whether or not someone is dependent for taxes is completely distinct from whether or not they are dependent for financial aid purposes.

It is hard to see how someone who earned $50k could possibly be viewed as a tax dependent by the IRS. Your older kid should review the rules for tax dependency very, very carefully, and file amended returns for past years if it is determined that the wrong ones were filed earlier. That you have chosen to cover this child’s living expenses so that the child can build up personal savings is immaterial. The child earns enough to live on independently.

Likewise, review the FAFSA guidelines for household members. Electing to share a roof and to cover living expenses for your older child probably aren’t sufficient to include that child in the total household.

If your son has provided more than 50% of his own support in 2018, then you can’t claim him as a dependent on taxes.

But to be a household member for FAFSA and count as a student for the year 2018/19 you had to provide more than 50% of his support. So you can’t have it both ways.

The exemptions are going away for 2018 tax year. The standard deduction for a single person goes up to $12,000.

For the year 2019/20 it sounds like you only will have one student in college. If the older brother is living with you and is supported by you more than 50%, then you should be able to count him in household size.

The older son should check his withholding to make sure he has enough taxes withheld.

Older child is 20 years old. I provide all his support so he is legally my dependent. I believe I mentioned that I provided all his support, housing, food, school, medical insurance. He works a lot starting when he was 16 and is saving his money. We live in a city where decent one bedroom apartments are over $2000 a month. He is not moving out anytime soon nor does he have to amend his dependent status. He withholds 0 but dependent isn’t the same standard deduction whiich is why he gets hit on taxes.

I believe I can still legally claim him as a dependent this year. The question is does it affect the financial aid of the second child if I don’t?

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If he earned that much, there’s no way that you can claim him. What does he do with his income?
Who pays for his car, gas, car insurance, clothes, hobbies, etc?

@kelsmom if this adult child is earning that much, but saving a lot of it, can the mom still claim him? That sounds very strange since he earns so much.

If you can claim him as a dependent on taxes for paying all of his support in 2018, then he cannot claim himself.

The FAFSA EFC will double if you go from two students in college to one next year.

If you still plan on paying older son’s expenses in the 2019/20 school year, then you should be able to count him in household size for FAFSA.

Your tax filing status had NOTHING to do with your financial aid status…at all.

If this kid is a member of your household, you can count him as such on the FAFSA. But really, unless he is trending college at the same time as your college bound kid, this won’t matter very much at all in the financial aid calculation. It’s having multiple kids IN college at the same time that has a good potential to reduce your FAFSA EFC.

Actually the married filing jointly standard deduction for 2018 is going to be $24,000 and the single standard deduction is going to be $12,000. So it is the same.

Thank you thumper. If whether he is a dependent or not has nothing to do with financial aid that is all I needed to know. I will count him as a household member and let him claim himself.

Everybody seems to be hung up on how much my son earns. Older 20 year old son is a full time student who has had a union job since he was 16 in high school which now pays him over $20 an hour and he works close to 60 hours a week. He is either at school, work or asleep. I pay for everything except his clothes and if he goes out with friends. We live in a city with high wages, unfortunately that also means high food and living expenses. Many kids graduate and still live at home. Since my child is still a full time student this year supported by me I wanted to know if not claiming him would hurt financial aid for second child. Next year when not a student he will of course claim himself even if living at home.

Wow, I wonder from these responses how many of you make your kids pay for their living expenses if they have a job while in school. My kids work hard, yes second child also works while in school. I encourage them to save their money for the future. It is my job as a parent to provide for them until they have graduated. The amount of money they earn does not change this. I guess many of you feel differently.

It sounds like your son is earning more than 50% of his support.

I think he has to spend it on his support.

Again, FAFSA says in order to be counted in household size you have to provide more than 50% of his support.

You said you did for 2018 and plan to do the same in 2019, and until June of 2020, right?

So then he counts as a household member for FAFSA for 2018/19 and 2019/20 aid year.

But if he didn’t provide 50% of his own support in 2018 (since you provided more than 50%), then he cannot claim himself on the the 2018 tax return.

You can claim him and should, since you might get a dependent credit and possibly an education credit.

There is no upside to him claiming himself on the 2018 taxes as I have explained.
The standard deduction is now $12,000 for single taxpayers. He can get that whether you claim him or not.

I believe he has to spend the money he earns on his own support for it to count in the support test. So if he saves it all, then the parent could technically pay more for his support than he is.

But of course the question might come up, so keep good records.

But you cannot claim him as FAFSA household member and say you pay the majority of his support, and then turn around and say that he can’t be claimed as a dependent on taxes by you.

I make sure that we pay more towards my D’s support in order to still claim her on our taxes and count her as household member (and student in college) on FAFSA.

https://fafsa.ed.gov/fotw1819/help/snumOfFamily.htm

This is what FAFSA says about household size.

https://taxmap.irs.gov/taxmap/ts0/supporttesttobeaqu_o_421c3073.htm

IRS support test for qualifying child

You said you provided the majority of his support for your 20 year old in 2018.

So you claim him as a dependent on your 2018 tax return.

He claims his 2018 income on his tax return and gets a $12,000 standard deduction. That is new for 2018. It is higher than in the past.

If he was a student and under 24 years old, he was your dependent for tax purposes. The IRS doesn’t allow him to decide to be independent and take the exemption for himself - if he is a ‘qualifying child’, and that includes a student under 24 for whom you pay more than 50% of his support, the exemption belongs to the parent. The only thing he ‘lost’ by that was the ~$4000 personal exemption, so in 2017 he paid taxes on that $4000. You took it, he didn’t, so it saved you on your taxes. If you feel bad about it, you can give him the amount you saved in taxes (would depend on your rate, but $400-600). He still would have paid a penalty for underwithholding if he did it two years in a row (he really needs to have the correct amount withheld from earning).

It’s not really a ‘take him if you want to’ situation with the IRS. If he did not support himself, the deduction is yours as he’s a Qualifying Child. If you didn’t take it, he couldn’t take the personal exemption. By definition, he WAS a dependent. Next year it won’t matter except for the $500 credit that a parent can take for a Qualifying Child. If he’s a student, you can take it. If you don’t, he doesn’t get it. There is no more personal exemption so there is no benefit to him. His standard deduction will be $12k whether he is a dependent on your taxes or not.

The child’s earnings and savings affect the EFC a lot more (a LOT more) than family size. Student assets are assessed at 20%, and if a student earns more than ~$6300, that is assessed at 50% - double whammy if student is working and saving. The ‘half the EFC’ is for the FAFSA only. The school can use the CSS information any way it wants to and if you currently pay $12k there is no rule that says the school can’t decide you need to pay $30k with just one child in school. Having an extra family member won’t matter that much in their formula.

When the older son was in school, his EFC should have been much higher than the sibling’s EFC. All that income and savings should have sent it off the charts.

https://www.irs.gov/individuals/irs-withholding-calculator

Your son can check his withholding with this IRS withholding calculator.

I ran it with $50,000 income as a dependent of another taxpayer and it came back with a tax liability of $4,373.

Did he have this much withheld so far?