College student & Dependent claim

[Richard1024]

My client & daughter just recently move back into the home of the parent/grandmother.  So it's client, daughter & grandmother (3 generation) all under one roof.  My clients' daughter turned 19 prior to end of 2019; however has been enrolled in college classes for "at least half time" (per 1098-T).  The client have also attended college full time (degree program) to advance their career.

Everything seems good to claim daughter; however as I look at the incomes (due to daughter working full & client now going to school full-time); the income allocation has flipped where the daughter now makes more than my client.  Now the question, did the student (19-year old daughter) provide over half of their own support.  The student (daughter) made about $28,000.  As mentioned both individuals live with the parent of my client, so everyone contributes to the upkeep & expenses of the household.  At first I thought claiming daughter was valid but once I realized the incomes provided, I am now on the side of the client cannot claim daughter.  Rather than giving a definite NO, I wanted to get some thoughts just in case I may have the incorrect interpretation of the rules/publication (970) 

[hillsboro15269 · Accepted solution]

There's a worksheet in Pub 17 you can go through to see if the daughter did, indeed, provide more than 1/2 of her own support. In the new Pub 17 it's on page 29.

Short version:

1. Daughter's income -- $28k
2. Amount of line 1 used for her own support
3. Expenses for entire household (rent or fair rental value of home if owned, utilities, food, repairs, all other household expenses)
4. Total number of persons in household -- 3
5. Line 3 divided by line 4. This is the daughter's share of household expenses.
6. Daughter's personal expenses (clothing, education, medical, travel, personal, etc.)
7. Add lines 5 and 6. This is the cost of the daughter's support.
8. Line 7 times 50%
9. Is line 2 > line 8? If so, she's NOT a dependent. If not, since she meets the other tests to be a qualifying child (see below), she IS a dependent.

Tests to be a qualifying child: Relationship? Check. Age? Under 24 and full-time student, check. Residency? Check. Joint return? I'm assuming check, though you didn't say.

Pub 17 is your friend. Seriously.

[Kimberly333]

Of course Hillsboro has got the response covered. I'm just thinking if they are eligible for education credits not being able to claim the daughter as a dependent might actually be to all their benefit. Each file single, claim themselves and maximize the credit. In this case a NO is a good thing...

[Richard1024]

Thanks so much for the feedback on this.  As always, greatly appreciate the quick response.