When filing your income taxes as a graduate student, claiming yourself as a dependent lowers your tax bill not only by reducing your taxable income but also making you eligible to claim an education credit for your tuition. Even if you spend most of your time at school, your parents might still be able to claim you on their taxes. However, if you’ve completely left the nest, it’s unlikely your parents will be able to claim you.
If you are a full-time student and under age 24 at the end of the tax year, you meet the age test to still be claimed as a qualifying child. However, just because you meet the age test doesn’t mean your parents can claim you. You must also live at home for at least half the year, but you can count time that you are away at school. For example, if you live at home during the summer and winter breaks and live elsewhere only when you’re in school, you still meet the test.
If you’re 24 or older, or you aren’t a full-time student and you’re older than 18, your parents can’t claim you as a dependent child any more. However, they might still be able to claim you as a dependent relative, though the criteria are much more stringent. First, you can’t have more gross income than the value of an exemption. For example, if an exemption is worth $3,800 and you earn $3,950 from work-study, your parents can’t claim you. Second, your parents must provide more than half your support during the year. For example, if your parents pay for 55 percent of your expenses, they could claim you.
Though the support tests are slightly different for dependent children and dependent relatives, the definition of support is the same. Support includes your living expenses such as food, clothing, rent, medical costs, tuition and utilities. If you’re taking out student loans, it counts as support you provided if the loan is in your name only. If the loan is in the name of one of your parents or your parents cosigned the loan, it counts as support provided by your parents. Scholarships do not count as support.
Education Tax Break Implications
The lifetime learning credit and the tuition and fees deduction can be claimed only by the person who claims the exemption for the student. For example, if your parent claims you as a dependent, your parent gets to claim the income tax break. However, if you claim yourself, you’re eligible to take the tax break. However, to be eligible for the tuition and fees deduction, not only do you have to claim yourself, but you have to be the one paying the expenses.
Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."