I’m trying to determine if my daughter will have enough earned income to claim that she provided 1/2 of her support. She worked full time this past semester and this summer in a paying internship.
Here is my question: She has a complete scholarship for tuition. I know that doesn’t count for support, but if tuition is covered by a scholarship does she then still have to calculate 1/2 of those education expenses when figuring if she provided 1/2 of her support with earned income?
@BelknapPoint betting you have the answer!
I think that education expenses paid through a scholarship are disregarded. In other words, those expenses and the scholarship payments for them are not included in the calculation used in the support test. This can be a frustrating exercise, because there are so many gray areas in the support test. If you haven’t already seen it, take a look at IRS pub 17, specifically the info. on pg. 29 and worksheet 3-1.
I thought that was the answer, but I can’t find anything concrete. Thanks for your help.
I agree that you just ignore the expense and the money that pays for it. A wash.
But will it matter this year? If the parent claims her, the parent will get a $500 credit (no exemption), but the student will get the $12k standard deduction if needed to cover the earned income and any unearned that qualifies (such as a scholarship that covered room and board).
Because of taxable scholarships and substantial 529 withdrawal (withdrawal done to match scholarship), unearned income would easily go over 37% bracket if she does not provide 1/2 support with earned income. I think I have found a table that confirms what we think - Click “visit page” on this site to see the table: http://onlinedigeditions.com/publication/?i=391560&article_id=2735227&view=articleBrowser&ver=html5#{%22issue_id%22:391560,%22page%22:%226%22}
Also, the table seems to confirm that taxable scholarships can be used to pay for room and board, thus further reducing the amount necessary for the child to provide their own support with earned income.