One of the biggest questions that parents across the United States of America have today is whether they Can Parents Claim College Students as Dependents if their child has started college. As parents, they are used to having their child live with them, carry out their expenses, and thus is ruled out as a dependent every tax season, but once their child starts college and spends a predominant part of the year away from home, every parent thinks if their child is still eligible to be tagged as a Dependents.
Can Parents Claim College Students as Dependents ?
Yes. College-going students stand eligible to be claimed as dependent by their parents. Individuals must remember that only parents (or in case of single parenting, the student’s mother/father) may claim a student as a qualifying child. If a student is filing their tax return, the student’s parents may still be able to claim the student as a dependent.
Rules To Claim College Student As Dependent
Below, we have mentioned the IRS rules that parents must follow, to claim a college student as a dependent.
- Age
A child should be less than 24 years old (as of December 31 of that tax year), in order to be eligible to be claimed as a dependent. In addition to this, the child must be younger than the parents (or parent). The only exception to these age restrictions is if a student is “permanently and totally disabled.”
- Relationship
The student must be your:
-Son or daughter
-Foster child
-Stepchild
-Sister, stepsister, or half-sister
-Brother, stepbrother, or half brother
– A descendant of any of these categories (e.g., a grandchild or niece)
- Support
To have their request approved, parents (or the single parent) must ensure that they have provided more than 50% of their child’s financial support, which includes the below-mentioned expenditures:
-Food
-Clothing
-Shelter
-Medical and dental care
-Transportation
-Education
Parents must remember that any scholarships or grants that their child was awarded from their college generally do not count under the support provided to the student.
- Residency
The student must have lived with you for more than half the year. (This does not include temporary absences, such as those due to being away at school.)
Benefits of Claiming a College Student as a Dependent
Credits and deductions (which are education-related), such as the lifetime learning credit, and the American opportunity tax credit can aid taxpayers financially. In addition to these tax credits, taxpayers will also be eligible for receiving deductions like the student loan interest deduction.
By availing these tax benefits, parents can save on hundreds of dollars which can further aid them in funding their child’s college/university education. If parents (or a single parent) are still unsure about whether or not they should claim their child as a dependent, they can take a 15-minute online test offered by IRS. This test will them in determining to whom they can legally claim on their taxes.
Conclusion
Yes. College-going students stand eligible to be claimed as dependent by their parents. If a student is filing their tax, the student’s parents may still be able to claim the student as a dependent. Some factors that parents must consider before deciding to claim their college-going child as a dependent are mentioned below:
-age
-relationship
-support
-residency
We have discussed all of these points in detail in the article above.
Frequently Asked Questions
Question1) Can parents claim their child’s income on their tax return?
Answer) In case a child is required to file their return, they are eligible to be claimed by their parents as a dependent, but parents must remember that they won’t be able to claim their child’s income on their return. If a child makes less than the standard deduction amount, which is $12,550 (as of 2021), the child is not required to file their tax return, and hence, the child’s parents don’t need to claim their income as a parent.
But, in case a child’s only income is gained from unearned sources like interest, capital gain distributions, or dividends, parents have the option of including that income on their tax return. In this case, the child will not be required to file their return.
Question2) Do parents have to pay taxes on their child’s scholarship?
Answer) It depends. Certain colleges across the United States of America provide their students with tax-free scholarships. However, parents must use the saved money to pay for qualified education expenses for their children. For a clearer understanding, parents are advised to contact their child’s college/university and enquire with them about this concern.
Question3) Are there any tax-free college savings plans?
Answer) Yes. If their child has not started college yet, or if parents wish to start saving for their other children, they can consider availing a 529 savings plan or a Coverdell college savings account. Both of these grow tax-free from both federal and state income tax. In addition to this, funds that are withdrawn for education purposes are not taxable.