Got claims on your college kid?
Dependency exemptions for college students
By Julian Block
Do you help support a college-going son or daughter who works part of the year, obtains a student loan or receives a scholarship? Then you should familiarize yourself with complicated rules for a dependency exemption that reduces your taxable income for 2002 by $3,000. Who pays what expenses controls whether you are allowed to claim your youngster for 2002.
Basically, to claim an exemption for a college student, you have to furnish more than half of his or her total support for the year. It makes no difference how much income your youngster receives.
The usual ceiling of $3,000 on the amount of reportable income that a dependent is allowed to receive for 2002 does not apply when your child is either (1) under age 19 at the close of 2002 or (2) a full-time college student who spends at least five months (they do not have to be in-a-row months) of the year in school and will not attain the age of 24 by the close of 2002. Note, though, that the income cap does apply when your college-attending son or daughter has income above $3,000 and will be 24 by 2002's close.
Be aware that this exception from the income test applies only to a parent. A grandparent, for instance, who provides more than half the total support for an under-age-24, college-going grandson can claim him only if his reportable income for 2002 is under $3,000.
How do you define support?
The IRS list of support outlays includes food, lodgings, clothing, education, medical and dental care, recreation, transportation and similar necessities. Remember to also include the "fair rental value" of the lodgings you provide for a child living with you; add a reasonable allowance for use of telephone, electricity, furnishings, appliances and the like. "Fair rental value" is the amount you could reasonably expect to receive from a stranger for the same kind of lodgings, not the rent or real estate taxes, mortgage interest, et cetera, paid by you that is attributable to the space involved. Here's a tip: don't overlook the value of a year-round room you maintain for a child away at college and the food you provide while he or she is at home during a school recess. As for scholarships, leave them out when calculating total support. It matters not that your child actually uses the award for education and other support items. As for G.I. Bill benefits and the proceeds from college loans secured by the student, they are support the child provides, whereas any loans secured by you are support you furnish.
Are you ready to juggle the figures? Suppose the total support outlay will come to $20,000 for the year for your college student daughter, who is under the age of 24. You kick in $10,000 and she will provide $10,000 through student loans and part-time jobs. Or you contributed $10,000 until her graduation this past June, and her earnings for the rest of the year will total $10,000. In neither case can you claim her, because you will fail to furnish more than half her support. But if she puts some of her earnings in the bank this year or spends some on nonsupport items, you wind up furnishing over half of her support for the year and are entitled to the exemption.
You can e-mail questions and comments to him at firstname.lastname@example.org. To order his "Year Round Savings," send $9.95 for an e-mailed copy or $12.95 for a postpaid copy to J. Block, 3 Washington Sq., 1-G, Larchmont, NY 10538.