Please help me with this. Is it better to let claim themselves for financial aid purposes? If so what age or Year in College? Thanks!
Your independent status with the IRS tax return does not change your independent status with the FAFSA.
The rules for the FAFSA don’t really give you much choice
For FAFSA purposes, parent income/wealth is considered until age 23 so I would claim your child as a dependent.
Consult tax preparer for more guidance, but husband and I never qualified for tuition deduction with kids as dependents throughout college (they graduated May 2016). However this past year we spun off the kids and they filed their own returns and interestingly, the timing of spring tuition payment for one of our boys meant we had 1098-T in his name for 2016. At his income level, he qualified for tuition credit, so it was worth it. Now, I’m not an accountant or particularly well-versed in tax matters, so YMMV, but it was an interesting justification for removing them as dependents in 2016 (the last year they could have been dependents anyway). Kinda wish I’d timed other son’s tuition better so he’d have benefitted, too. Oh well.
Good advice @MTTwinsinCA2! Yes, definitely consult a tax preparer!
We stopped junior year of college because we were unable to purchase health insurance that meaningfully covered out of state care. He enrolled in medicaid, which is free. One funny thing: I made all the tuition payments but he got the American Opprtunity Tax Credit.
Keep in mind that this is for undergrad. If a child is pursuing a graduate degree, the age requirement doesn’t matter. D was 21 when she filed the FAFSA for grad school without our income. She is still our dependent for tax purposes.
@uskoolfish So would that be true if your D were 24, rather than 21, applying for grad school? Would she still be considered your dependent for purposes of the FAFSA? I ask because we have one almost there.
Depends on residency requirements for the state where your kid is going to school. Our daughter became a state resident in a year and qualified for in state rates. Tax and tuition wise, it made sense for her to be independent of us.
@HappyDancer98 The FAFSA form for undergraduate programs is different from the FAFSA for grad school. I do not think the age of the applicant matters. The distinction is between grad and undergrad applicants.
On the grad FAFSA, we were able to leave blank all of the questions about our income. We only gave her financials–some savings in her name and some income from summer jobs.
Her EFC was very low despite declaring about $40,000 saved in mutual funds and savings accounts, plus an income of maybe $5,000.
Nobody asked for our financials and we kept it off the form. NYU accepted the FAFSA as is and gave her scholarship $. Previously our FAFSA for undergrad was $99K+.
Separate from that, we still declare our D as a dependent for tax purposes.
Here is the link showing that if you answer “yes” that you are enrolled in a grad program, you are considered independent.
Thank you @uskoolfish! That’s some good information!
Thanks guys!!! You are awesome!!!
@MTTwinsinCA2 Exactly! If they graduate in May and get a job they become self supporting, so in that tax year since they went to school for their final semester and they were self supporting for more than 6 months of the year (June-Dec) they will be elegible for at least a tax CREDIT of $2500 plus whatever other refund bcause their income is low (even with a good job since they only worked 7 months). Otherwise not only would you have to add their income to your own and if you are subject to AMT (another issue where personal deductions are no longer given) you end up paying tax on their income at the highest rate and no college tax credit. Overall your looking at a $6-7k swing.
@katliamom @Walker1194 seems to have been able to gain in state residency in a year…just saying.