Tuesday, January 20, 2009


Did you know that the definition of a “dependent attending college” for purposes of the extra exemption on the NJ-1040 is slightly different then the general federal rule?

For federal income tax purposes as long as you are under age 24 and a full time student you may qualify as a dependent, and may be subject to the “kiddie tax” on excess investment income.

The federal rules further state that to qualify the student must be “enrolled” full-time in school (not an online or correspondence school) during some part of any five (5) months of the calendar year. Private Letter Ruling 9838027 allowed the month of August to be counted when the student registered on August 28 but did not actually begin to attend classes until September 2.

For NJ state income tax purposes you can claim as a dependent “each dependent child who qualifies as your dependent for Federal income tax purposes”. However the requirements to claim an additional exemption as a “Dependent Attending College” the following requirements must be met –

* Student must be under age 22 years of age for the entire tax year.
* Student must attend full-time. “Full time” is determined by the institution.
* Student must spend at least some part of each of five (5) calendar months of the tax year at school.
* The educational institution must maintain a regular faculty and curriculum and have a body of students in attendance.

The extra exemption is not allowed for 22 or 23 year old full-time students, although such students who otherwise qualify could be claimed as dependents on the NJ-1040.

There also seems to be a difference in the determination of a month that qualifies toward the 5 month test. For federal and state dependency purposes as long as the student is enrolled during the month it counts toward the required 5. However for the additional exemption on the NJ-1040 the student must actually “spend time” at the school, which appears to mean attending classes. For this purpose the student who registered in August but began classes in September would only have 4 qualifying months.


No comments: