Self-Supporting or Dependent: Why It Matters at Tax Time

It can be challenging as a college student to understand whether you should file your own tax returns or have your parents claim you as a dependent on their federal and state tax filings. Even though you may not live at home and only see your parents on school breaks, the Internal Revenue Service (IRS) considers you a dependent for tax purposes if they provide more than half your financial support. This blog covers how to determine whether you are dependent or independent as well as the potential benefits and drawbacks of each filing status.

IRS Rules for Parents Claiming College-Age Children on Their Tax Return

Normally, the IRS only allows parents to claim a child as financially dependent until he or she reaches age 19. The age limit increases to 24 if you attend college full-time at least five months out of the year. Here are some other criteria to indicate a dependent status for tax filing purposes:

  • The dependent is a biological or adopted child, stepchild, sibling, stepsibling, or a child of a sibling or stepsibling.
  • The person claiming the deduction for a dependent must provide 50 percent or more of the dependent’s financial support. For IRS purposes, support includes such things as food, shelter, clothing, and medical care.
  • The 19 to 24-year-old dependent must have lived with parents or other guardians for at least half the year. However, the IRS does allow exceptions for college students temporarily living away from home.
  • The college student must be a natural or legal immigrant of the United States.

You should file your own tax returns if one or more of these IRS criteria do not apply to your situation.

Considerations When Filing as a Dependent or Independent Student

If your parents meet eligibility criteria to claim you as financially dependent for tax purposes, it is usually more beneficial for them to do so rather than you claiming a deduction for yourself. Parents typically have a higher income since they are older and more established in their careers. Because of this, your parents are likely to receive a greater tax benefit from your dependency status than you would by filing independently. They may even be willing to put any refund they receive towards your ongoing college expenses.

You still need to file a federal and state tax return if you earned your own income but received more than half your financial support from parents. Since the IRS only allows one taxpayer – or two in the case of a married couple filing jointly – to claim a deduction, you are ineligible to receive credits or deductions yourself. The only way for you to receive credits and deductions on your tax returns is by filing independently as a college student providing more than half of your own financial support.

Here to Help

College and finances can be complicated topics, but Accolade Financial is here to help. Please contact our office in York, Maine to request a consultation with an advisor. You are welcome to attend the appointment with or without your parents.