Dependent?

[TAXMAN]

My mind is shot. TP has a child that turned 24 during 2016. Still going to college. Child has not finished 4th year yet. However child working part time jobs made 9K in income. Does this 9k income and being 24 take the dependent away from mom and dad? Appreciate imput. All I read under qualifying relative rules say's dependent is gone.

[Tax Prep by Deb]

Yes, because the child no longer meets the age test.  Has to be under 24 by the end of the year.  So my take on it is age disqualified him as a qualifying child and therefore he or she could not have earned more than his or her exemption credit to qualify which is 4000 and some change (can't remember this years limit off the top of my head).

[Jack from Ohio]

You are correct.  Dependent is gone.  Age and income.  If there are any education credits, the student can claim them.

[Pacun]

If the student is NOT disabled, the parents cannot claim him, but he can file his own return and get the education credits if he qualifies.

[Lion EA]

Including the refundable portion, right?

[Jack from Ohio]

13 minutes ago, Lion EA said:

Including the refundable portion, right?

Yes, if he is otherwise eligible.

However, very few students at age 24 receive AOTC.  No refundable portion to the other 2 credits.

[Gail in Virginia]

To get the refundable portion of the AOTC, the student has to be able to state that they provided over half of their own support.

[TAXMAN]

In my case it appears students funds came from part time work, loans and what ever else tp could find. Moms and dads income would not indicate any financial help. In fact when asked mom and dad said they just could not afford to help. Even so, I believe TP cannot be claimed and is entitled to the refundable portion of the AOC assuming all other facts are met.

[Gail in Virginia]

But did mom and dad provide a place to live for student?  And groceries?  Even though they cannot claim TP as a dependent, that does not necessarily mean that he provided over half of his own support.  And if he did not provide over half of his own support, while he is entitled to the AOTC to the extent of tax due, TP would not be entitled to the refundable portion. 

[Gail in Virginia]

I just re-read the IRS Pub 970 section about requirements for refundable AOTC and I have changed my mind.  Since he is 24 at the end of the year, then item 1 (a, b OR c) does not apply to him and it doesn't matter if 2 and 3 do.  So I think that the parents can't claim him since he is 24, but he can qualify for the refundable credit.  See copy below: 

 

You don't qualify for a refund if items 1 (a, b, or c), 2, and 3 below apply to you.

1. You were:

   1. Under age 18 at the end of 2016, or

   2. Age 18 at the end of 2016 and your earned income (defined below) was less than one-half of your support (defined below), or

   3. Over age 18 and under age 24 at the end of 2016 and a full-time student (defined below) and your earned income (defined below) was less than one-half of your support (defined below).

2. At least one of your parents was alive at the end of 2016.

3. You are filing a return as single, head of household, qualifying widow(er), or married filing separately for 2016.

[Terry D EA]

Wait a minute Gail, I would agree with your first post. The OP stated the dependent in question turned 24 sometime during 2016.  Item 1c says "Under" age 24 at the end of the year. If he/she is 24 at the end of the year they cannot be "under" 24. It does not say 24 and under. Based on this, the dependent doesn't qualify for the refundable portion.

[Gail in Virginia]

That's how I read it at first but what it says is you DON'T qualify for the refundable portion if you are over 18 and under 24 and your earned income was less than 1/2 your support.  Well, he is not under 24 any longer so 1C does not apply.  Neither do 1a and 1b.  So, he does qualify. 

[Terry D EA]

Okay re-read it again and you are right again. He is no longer under 24 and as you say, none of the other items apply so I change my position and he does qualify. Sorry for mis-reading it.

[Tax Prep by Deb]

I have had problems with this too!  You have to read it very carefully as the does and does not get passed over.  When I make myself slow down and read each word I get it, but can't speed read it or I will read in circles.

[jklcpa]

I had a problem with this too. In my client's case the student had just enough in wages that she spent on herself and also borrowed on student loans heavily, and if I read the rules correctly those loans factor in to the funds that she provided for her own support for the dependency test. In this case the numbers worked out that the parents did not provide more than 1/2 of the support and could not claim her as a dependent, not that they forfeited it, but actually didn't meet the rules.  Part of the limiting factor for the parents was that the daughter didn't live at home for a couple of months and so some of the living expenses were prorated for the part of the year that she was at home.  Student claimed herself.

Then on top of that, she fell into that over 18 but less than 24 age range, and it worked out that her earnings were not more than 50% of her support, so she couldn't claim the refundable part of the AOTC.

I think I got it right, but I reread those rules and what I'd saved for my files over again.  At least, I hope I got it right....