Is Your College Student a Dependent? Maybe Not…

Now that your high school graduate is almost finished with his or her first semester of college, one thing that probably isn’t on your mind is if your child will still be a dependent on your tax return. While the answer might be yes, there are several things to keep in mind.

One of the four tests that a student must meet to be a dependent on your tax return is the Support Test. The student cannot provide more that one-half of his own support, and the parents must provide more than one-half of the student’s support.

Here are some items to keep in mind:

  • Support includes food, shelter, clothing, medical and dental care, education, and other similar items.
  • If the student purchases a vehicle, the fair market value is considered student-provided support.
  • Loans in the student’s name are treated as support provided by the student.
  • Scholarships that a student receives can be excluded from the support test.

Why does it matter? Often, parents pay tax at a higher rate on earned income than the student, which means they could receive a greater tax benefit (i.e., greater tax savings) from the exemption deduction, high education tax credits such as the American Opportunity credit or Hope Credit, or the tuition and fees deduction.