Monday, November 19, 2007


In a letter enclosed with her birthday card to me my cousin asked a tax question about claiming her daughter for 2007.

Her daughter lives “at home”. She became employed teaching 3rd grade in the fall of the year and is expected to earn about $12,000 for 2007. “I am wondering since we supported her for the first 9 months of 2007 {including about $7,000 in college tuition – rdf}, can we claim her?” my cousin asked.

I emailed my cousin explaining the rules for who qualifies as a dependent – under age 24 and a full-time student for 5 months of the year. She responded that her daughter graduated in mid June and turned 24 in September, “so it sounds like a go for 2007”.

I emailed her back and explained that unfortunately the "under age 24" rule does not apply to the period for which the dependent was a full-time student, or for the period during which the parents provided his/her support, but to the entire calendar year. If her daughter turned 24 in September of 2007, my cousin does not get her for 2007. To claim a dependent on your 2007 Form 1040 the “child” must be enrolled as a full-time student during any part of any five months during 2007 and under age 24 on December 31, 2007.

So it is not a go for 2007. The parents cannot claim my 2nd cousin as a dependent on their 2007 Form 1040. However, the daughter will be able to claim an education tax credit for her 2007 tuition on her own return, even if the tuition was actually paid by her parents, which should wipe out any federal tax liability. While a qualified “educator” (i.e. teaching 3rd grade), the daughter will not be able to claim the $250 “above-the-line” deduction for “educator expenses” because she did not spend at least 900 hours during a school year as an educator in 2007. But she will not need the deduction – the tuition credit will be enough to bring her liability to “0”.
BTW - today's posting at my ANYTHING BUT TAXES blog deals with the difference between debit and credit cards.

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