“In above case, the numbers do not support that student having supported self 50%.”
Note that this may or may not be the case, depending on whether the summer fellowship is earned or unearned income. With a full ride, and a student who stays away from home all year, it is not clear how much support the parents would necessarily be providing (perhaps just health insurance?).
Room and Board is $13k. That right there is more than what the the student earned unless she had as fund of some sort from which she was drawing for living expenses. I’m assuming the information given is correct and complete as to what this woman is getting. Note that it is irrelevant how much or little the parent has to be contributing to the support in order to claim her as a dependent.
@cptofthehouse The $13K scholarship for room and board is not counted as money received from the parents, or anyone else, it is simply ignored in the calculation. See https://www.irs.gov/pub/irs-pdf/i8615.pdf:
“Your support includes all amounts spent to provide you with food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities. To figure your support, count support provided by you, your parents, and others. However, a scholarship you received isn’t considered support if you’re a full-time student.”
The “$3K from part-time job” is in earned income and the $4K summer research fellowship might or might not be earned income. So if the student has free room and board and tuition fully covered, and is staying at college during the summer (so travel expenses may be limited and there will be no attributed parental support from the deemed cost of living at home) then it is quite plausible that parental support (for clothes, healthcare, etc.) could be less than $7K total for the year, which would mean the student may have earned income equal to more than 50% of her own support (if the fellowship is earned income). In that case the student would be exempt from the kiddie tax. She may then also decide to declare some of her tuition scholarship as taxable and take the AOTC credits herself rather than the parents doing so.
And with regard to this statement “Note that it is irrelevant how much or little the parent has to be contributing to the support in order to claim her as a dependent” to be a qualifying child “The child must not have provided more than half of his or her own support for the year.” and to be a qualifying relative “You must provide more than half of the person’s total support for the year” and “The person’s gross income for the year must be less than $4,150” (see https://www.irs.gov/publications/p501#en_US_2018_publink1000196863). So if the student is providing more than half of her own support, she cannot be claimed as a dependent.
Yes, kiddie tax looks at earned income in relation to support.
But for the purpose of claiming college student as dependent, I believe it matters how much of earned income the student actually spent on their own support. Some students earn money and then save it.
I have a question…how does reporting all of the unearned income from scholarships and grants affect EFC for the future?
“But for the purpose of claiming college student as dependent, I believe it matters how much of earned income the student actually spent on their own support.”
For the dependent test, earned income doesn’t come into it. The support can cone from the student’s own savings not just income. It is about who provided the support, as noted above.
Yes, but the support test asks what the student spent from earnings, savings, loans etc on their support.
I was trying to explain that simply because a college student who is considered living at home (with temporary absence at college), earns a lot, that doesn’t mean that they can’t be claimed as the parent’s dependent.
The FAFSA asks in question 44d how much in taxable scholarship the student reported as part of AGI and then subtracts that from student income for the EFC calculation.
The $4150 earnings limit is not applicable to full time students under 24.
The FAFSA numbers do not come into play here. The issue is whether this student is a dependent or not for tax purposes. The issue of focus is whether the student provided more half of own support for education, food, lodgings etc as defined by the IRS. Clearly we do not know what is out there in additional money so I’m sticking with what is posted. The Summer research fellowship is categorized as non taxable.
Where it gets tricky is that college is considered a temporary absence from home. Since room and board scholarships are not considered in the picture, parents can claim the cost of having a place st home for s college kid, whether he used it or not. My son was home for maybe 2 weeks last year. He had room and board covered at college. But we maintained a place for him here at home. His clothes, bed, teddy bear, mementos all here. When we visited him or he came home, we fed him. Would he be a dependent for 2018, if he also had a full tuition scholarship? Yes, he had earnings over the summer and during the school year. Without the scholarships, did he provide more than half of his support? Do we count the cost of his room at home?
Here’s the crazy thing here: the scholarships do not count as support any one , but they are part of the expenses. If a kid is racking up expenses at college for which the taxable scholarship is covering, he can’t claim any of that as what he is paying. The student has to be racking up expenses over and beyond that $13k that is on the table. It’s not like that expense is ignored. He has that expense but it is being taken care of by scholarship— He’s not paying it. So it’s not likely that he’s paying it, certainly not in that example where earnings is not there— unless there is a fund from which the kid is drawing the money.
The kid has to be paying more half of the cost of the expenses he is incurring to be non dependent. Note that it doesn’t say the parents have to be contributing anything in the publication.
@cptofthehouse My question thought is if you’re adding in say 10k in unearned income for the student how does this affect their EFC in subsequent years? Does it get added into their AGI?
@collegemom9 - the income is added to the AGI for tax purposes, but then subtracted from the income on the FAFSA for calculating the EFC.
@collegemom9 , yes it is part of the AGI. But FAFSA adjusts that on their own form with the question asking how much in taxable scholarship a student received.
@cptofthehouse AHHHH that makes sense, phew!
There was a case that my oldest still gets huffy about, some years ago in our area. Kid left home, moved in with boyfriend, went to college fulltime with part time job. Parents apparently did not give a dime towards this.
Come tax time, parents claimed kid as dependent. Kid challenged it and lost. Just because parent didn’t pay, didn’t mean kid paid for more than 1/2 of what it cost on that IRS sheet. It wants your bank balance. beginning of year, income-not counting scholarships, but including loans, and then the ending balance and if student doesn’t come up with paying those more than 1/2 expenses, student is dependent. Doesn’t matter if it’s scholarship, sugar daddy or anyone else paying them. Student has to show that it’s coming from self. Insult upon injury, the parent can claim AOTC.
There are ways around this if a student is determined to be deemed independent but it has to be done in a verifiable way.
@collegemom9 Same with earnings from a work-study job. The earnings are treated as earned income and taxed as part of AGI. But earnings from a work-study job are excluded from income on FAFSA for the purpose of calculating EFC.
“The $4150 earnings limit is not applicable to full time students under 24.”
The earnings limit is not applicable to a dependent child. But your child can still be a dependent relative, if they don’t qualify as a dependent child (for example if they no longer live at home because they are not “temporarily” absent at college) and in that case the earnings limit does apply, even though they are your child.
“Where it gets tricky is that college is considered a temporary absence from home”.
This is up to the student and family. If the student takes affirmative actions (e.g. registering to vote at college, changing driving license if in another state) to move their domicile then they would no longer be temporarily absent from home. That’s what my D18 did when she went to college in Utah (in her case one consideration is the low personal exemption/high kiddie taxes applicable in CA, because CA hasn’t conformed to the new federal tax law, which isn’t the case in Utah). In that case there would be no need to attribute costs of their bedroom for the whole year, though you might pro rata the costs for any time they spend there (i.e. if they are home for one week a year, you attribute 1/52nd of the total per person cost of the household, which is for example 1/4 of the total cost for a family of 4).
@brantly Thanks for telling me. Makes sense. It seemed crazy to me you’d be penalized in subsequent years.
It does matter for FAFSA whether parents paid more than 50% of student’s support. Then the student can be counted as household member and student in college, if all other rules apply.