Deciding whether someone is a dependent for tax purposes

So Dweezilh as been working a lot of hours at the grocery store this past year. I had a mental image of what his earnings were, but tonight I got him to give me his W2 so I can start sorting out the family tax situation, and it was about 50% more than I had thought. Still under the Federal poverty guidelines - but not by as much as I’d thought.

Now, of course, my first thought is “can I borrow some money?” because hell, he doesn’t have a mortgage and isn’t (yet) supporting his aging parents like we are, so he’s got more ready cash than I do.

My second thought is figuring out whether we can still claim him as a dependent. Arguably we provide half his support if you figure in the cost of housing and health insurance, and of course virtually all his food (admittedly with the benefit of his employee discount at the store!).

How would you go about valuing all that for tax purposes? I could probably get good numbers for how much extra the health insurance costs to cover him, and could get the auto insurance to say how much extra it costs to have him covered (it’s over a thousand a year, for sure).

But the cost of housing is more nebulous - I suppose we could say 25% of the mortgage payment covers his part of the house, so value that as providing housing, ditto utilities, ditto groceries. Or I could assume housing equivalent to the low rate we’re charging a friend who’s renting the basement (I think we’re charging her below-market rates but haven’t looked at “roommate wanted” to figure that out).

It’s obviously more beneficial to us to have him as a dependent - if the personal deduction is 4,000 dollars and we take it at our higher tax bracket, that’s more than his deduction would be at his lower bracket.

Is he in college? If so, the only real qualification is that he’s under 24. If he’s not in college, the cutoff age drops to 19.

Everything else seems to be not as important as long as you’re responsible for more than 50% of his expenses.,-Status,-Dependents,-Exemptions/Dependents-&-Exemptions/Dependents-&-Exemptions-2

I let my mom claim me throughout college, even though I lived on my own and paid everything myself. It was worth thousands of dollars to her and not much to me. If I actually lived in her house, I don’t think it have been a question at all.

A tip:

The support standard for a qualifying child (a child under 19 or a student under 24) is NOT that you provided more than half the child’s support. It is that the child did not provide more than half of his own support. And just because a child earned money, that does not mean he used it to support himself.

Note: This is different than the standard for a qualifying relative. You must provide more than half the support for a qualifying relative, but not a qualifying child.
Here’s a trick, if you can afford it: Have your child put their full salary in a Roth IRA. Money put in a Roth IRA or an investment account or even a savings account is not money that is used to support the child. If your child doesn’t spend any of their own money, there is no way they can have provided more than half of their own support.
(The Roth IRA limit is $5500 or their compensation income (basically earned income) per year. If your child earns more than this, put the rest in some other kind of investment account.)

Of course, the converse applies: If your qualifying child withdraws money from his own account in order to support himself, that counts as support he provided.
But the important point is: Don’t look at the child’s salary. Look at how much the child spent to support himself. If the amount everybody else spent to support him (combined) is more than the child spent, you have met the support test.

He is indeed still in college - part-time, but we’ve been insistent on that. He’s motivated to do that as well (long story, not relevant to current discussion).

I actually found an IRS worksheet and as others noted, it seems to be how much he spent supporting himself, not what his income was. So if he earned 10,000 but only spent 4,000 on himself, we just have to pay more than 4,000. Since the worksheet involves, among other things, tallying up household expenses and dividing it by the number of residents, that should be more than his outflow.

Now I’m curious though. If he earns 10,000 a year and 1,500 is paid as taxes, that leaves him with 8,500 in cash. If he’s got 5,000 left at the end of the year, did he “spend” 5,000 or 3,500?

Alley Dweller: Yes, we’re making him put money in a Roth - I actually need to sit down with him and do the steps, as he hasn’t done it himself. Both my kids know this is non-negotiable - 10% of all earned money goes to retirement - ideally even more. They’re seeing their grandparents living very much on the edge because the grandparents did NOT save, and they’re seeing that money is tight for us parents as a result (because we don’t want the 'rents living in our basement or on the street and whatchagonnado but help them out?).

A somewhat related question: How about non-relative dependents? We had a friend living with us most of last year - no income during that time. By the same standards, we definitely provided more than half the friend’s support. Dare we claim the friend?

To be a dependent, you need to either be 1) a qualifying child or 2) a qualifying relative. (A qualifying relative does not actually have to be related to you.) You are a dependent if and only if you are one of those two things.

You said that your son is in college part-time. If he is 19 or older at any time during the year, he cannot be a qualifying child. For a 19 year old to be a qualifying child he must have been a full-time student for at least one day in each of 5 months. This requirement does not apply if he is 18 or under all year.

To be a qualifying relative, the person’s gross income for the year must be less than the personal exemption amount for the year. In 2015 that was $4000. So if he earned more than $4000 in 2015, he is not a qualifying relative, regardless of whether he spent it or not.

Money spent on income taxes as well as Social Security and Medicare taxes if it comes from the dependent’s own income does not count as support. So if he paid his own taxes, that does not count as support that either you or he provided. So he spent $3500. But don’t forget that if he gets a refund at the end of the year, the refunded amount really wasn’t spent on taxes.

Since he is not related to you, he is not a qualifying child.

A qualifying relative who is not related to you must have lived with you all year, not most of the year. So he is not a qualifying relative.

No deduction for you.
If you have any other questions, I suggest you run them through the IRS Interactive Tax Assistant: Who Can I Claim as a Dependent? (Yes, I know it should be “whom.”)

Aha - I didn’t know about the 4,000 dollar cutoff for over-18 and part-time student - thanks!! That blows it out of the water right there. I don’t think 2-3 courses at a time qualifies as full-time, though I suppose we could try that and claim innocence.

Or we could try claiming that he’s disabled - he has high-functioning autism, so it’s not a spurious claim at all - which might reset some thresholds. I’ll do some more research. Not sure what documentation / certification is required for that (we never, for example, pursued being declared his legal guardians once he turned 18). Edit: scrap that, IRS says “cannot engage in any substantial gainful activity”, which is clearly NOT the case, and we’re certainly thankful for that. He may never get rich bagging groceries but right now the kid’s got more spare cash than we do :D.

On the friend: he moved in in mid-January, but had a lease in place prior to January 1, so we could probably weasel on that as well, but I’d been leaning away from it anyway as I figure that’s a pretty good way to invite an audit. And I think he had 4K in income - though barely - so again, that would blow it out of the water.

Autism may indeed change things. Obviously, you should wait for the other people who actually know what they are talking about, but I thought a tiny bit of reassurance may be helpful.

I know that my mom was asked to provide proof that I was either autistic or one of a few other issues when she tried to claim me as a dependent on her state tax return, due to my qualifying for disability SSI. (I don’t have autism* nor the other disabilities, so I didn’t qualify.)

So it might count as a disability that could allow you to claim him.

*At one point, I was diagnosed with PDD-NOS, which is on the autism spectrum, but that diagnosis was considered wrong at the same time they got rid of saying I had ADHD. I still don’t know if I was misdiagnosed or if I sorta grew out of those–probably a mixture of both.