When parents use their children as tax deductions when the child is in college, does it make the parent liable

Question

There is case law in regards to this matter. Also, according to the FinAid.com Website it states, if the parents are claiming the student as a dependant deduction, it IS their responsibility. Your thoughts? Parents are making combined 125K per year and this is the only child persuing college per the advise of the parents.

Child was living on campus for whole year working to pay for school from the ages of 18-24, but parents kept claiming him as a dependant to receive the tax deduction. They feel since he was on their insurance that gave them grounds to claim him even though he did not live at home nor did he accept any money from them as they didn't offer it. Now the student is in 40k debt for undergrad student loans and the parents attitude is, "So what??" If they were claiming the standard deduction, at the ever least they should pay that amout towards the principal balance.

Answer 1

The tax rules since 2005 have separated parental support and the tax benefits for a qualifying child. So, if you qualify as your parents "qualifying child," this designation has no requirement that your parents support you at all. Therefore, the dependency on the tax return could not be used to argue that the parents are liable for your support, since by the tax code, they are not required to support you in order to claim you as a dependent.

Response to your added information: If you were allowed to claim yourself in those years, would you have received a refund. Probably not, since proceeds from loans are not income. However, if you can document that you provided over half of your support for 2004, 2005, 2006, or 2007, then you may amend your return and deal with the obligation to prove that you provided over half of your support.

In any case, your parents are not required to pay back your student loans unless they cosigned for them. Interest on your student loans will probably be deductible for you in the years that you make payments.


The situation was radically different before 2005. If you find case law regarding the period before 2005 that states that the parent must support the dependent child, it is now irrelevant.

Your parents may claim you as long as you did not provide over half of your own support. Since your parents are relatively high income, it may be more difficult for you to prove that you provided over half of your own support, even if you paid for your own education.

Answer 2

Liable for what? Paying for college?

This is a sticky issue as a child generally can't sue their parents, but divorcing spouses have sued each other it. According to that website, about half of the states will take the issue into consideration, but that means half don't.

From the IRS's point of view, the issue is support. Either the child was supported by the parents or he wasn't. If a child is in school and had to get loans--which the child is legally obligated to pay--or a job to pay for tuition because his/her parents won't pay, then in all likelihood the child supported themself and the parent's CAN'T claim them.

Additional info--get publication 501 from irs.gov. Around page 31 is a support worksheet. Run through the numbers. (Be very, very careful when you get to housing. If you lived at home when you weren't in school, then you were temporarily away from home and you have to use *their* housing expenses + the cost of the dorm room.) If you can show you paid more than half, AMEND your returns. Your parents will be forced to amend theirs as well and will have to pay back an erroneous refund (it's erroneous to claim you if they weren't entitled to, biology isn't everything) plus penalties and interest.

Answer 3

they are RESPONSIBLE for your education and housing, food, etc, UNTIL YOU REACH AGE 18. They are NOT liable, regardless of income.