College Graduate: Are you still a dependent?

Ed note: Over and over again, we hear from clients who are confused about dependency. This is particularly true for recent graduates who may be wondering whether they should claim a personal exemption or whether their parents can still file with them as a dependent. Here’s some help to clear that up. Leer en español.

GraduateDependentSo you’ve just graduated from college and you’re finally out in the real world, free from the restrictive grasp of your parents. But are you really? According to the IRS, maybe not, because your parents may still be able to claim you as a dependent on their tax return.

When it comes to dependents, we typically think of minor children living in their parents’ home. However, the rules for claiming dependents can apply to adult children who are no longer in school.

For recent college graduates (i.e., those over age 19 and no longer considered to be full-time students), their parents may be able to claim them as dependents under the rules for qualifying relatives. Generally, parents can claim their adult son or daughter as a dependent if the following are true:

  • The child’s gross income is less than the personal exemption amount for the year ($3,950 for 2014; $4,000 for 2015).
  • The parent provides more than one-half of the child’s support for the year.
  • The child is not considered to be the “qualifying child” under the dependency rules of any other taxpayer for the year.

Note that there is no requirement that the son or daughter actually reside with the parent for the parent to claim them as a dependent.

So basically, if you make less than the above amount in a year and your parents are footing more than half of your bills, they are likely entitled to claim you as a dependent. When you cross that income threshold or start providing the majority of your support, you are free from your parents’ tax clutches.

It is important to note that if your parent can claim you as a dependent, you cannot claim your own personal exemption on your tax return. This is true even if your parents don’t file their return with you listed as their dependent, or don’t file their own return(s) at all.

Not sure if this applies to you? Luckily the IRS provides an easy way for individuals to determine whether they can claim their own exemption on their website. See: Can I Claim My Personal and/or Spousal Exemption?

13 Tips For A Free College Education

Ed note: If you read “college” and “free” in the same sentence and automatically think “scam,” I don’t blame you. Higher education and high prices tend to come hand in hand. However, Donna Freedman has 13 awesome ways to make that degree free (or low cost). Warning: it will take some work. Leer en Español.

How much does college cost? That depends. College Data reports that yearly tuition and fees (but not housing) at U.S. colleges ranges from $8,893 for state residents at public colleges to $30,094 for private colleges.

The average 2014 graduate carries a debt burden of $33,000, according to The Wall Street Journal. However, if you work the angles enough, you might not have to pay at all.

Not all of the following tactics will work for everyone, but current and future students should try as many as they can. Imagine graduating with no debt at all, thanks to things like:

  1. Thinking “local.” Non-resident tuition rocks. That $8,893 number from above is for state residents at public colleges. Non-residents pay an average of $22,203.
    Donna1
  1. Thinking very local. Take two years at a community college and you’ll get core courses at a lower cost. Make sure your credits will transfer; see the College Board’s MatchMaker to find schools that accept them.
  1. Commuting. If school is less than an hour away, live at home. Dorm living adds $9,500 to $10,830 per year to your bill, according to The College Board.
    Donna3
  1. Getting credit early. Teens who take Advanced Placement (AP) courses and pass AP exams get college credit and/or the chance to skip intro courses. AP exams cost $91 (or less if you can demonstrate need).
    Donna4
  1. Earning pre-college credit. Get three to 12 credits through the college-level examination program. Each exam costs $80; some 2,900 colleges and universities accept CLEP credits. Take a sample test to get a feel for the program.
  1. Attending a free college. FinAid.org has a “Colleges With Free Tuition” list. You’re still on the hook for room and board and you might have to work. Still: Free tuition!
    Donna6
  1. Applying for scholarships. Do this every year. Sites like FinAid.org and FastWeb.com compile money opps (including some really unusual ones). Some colleges have their own scholarships and/or info on local or regional monies.
  1. Getting a job. An on-campus gig is ideal, particularly if it’s in your field of study. Aim for 20 hours a week or so. Bonus: You can emphasize your work ethic and time-management skills to future employers.
    Donna8
  1. Becoming a resident assistant. This is not a job for everyone. However, free room and board and maybe some other perks will greatly reduce your total cost.
  1. Graduating early. Take summer classes and/or extra classes during the school year. Or look for a three-year bachelor’s program; the National Association of Independent Colleges and Universities has a list of a number of schools that offer these.
    Donnagrad
  1. Working it off. Loan forgiveness programs like the ones offered by the U.S. military and the National Health Services Corps might be a good fit. AmeriCorps has three programs featuring education awards and/or loan forbearance. Teach for America offers the same benefits plus a financial award that can be used for student loan repayment or continuing education costs.
    DonnaTeach
  1. Living off-campus. Find several other responsible students and split a place instead of paying those high dorm fees. “Responsible” is the key word: You want roomies who are just as serious as you are about graduating on time and with no debt.
    Donna12
  1. Paying by the month. Handing over $988 each month from September through May is a lot more manageable than paying $8,893 two or three times per year. Many colleges allow payment by monthly installments, according to Zac Bissonnette, author of “Debt-Free U.” Scholarships plus part-time job and anything your family can contribute could add up to a no-loan college experience.
    Donna13

Deadlines for U.S. Expats Approaching

If you are a U.S. citizen living, working or stationed abroad, and haven’t filed a tax return yet, you need to submit it by June 15.

That’s just a couple weeks away! If you still need help preparing a return, contact H&R Block Expat Tax Services. They offer virtual and, in some countries, in-person services to help you get the return filed on time.

If you think you can’t make the June 15 deadline, file Form 4868 to get an extension until October 15. However, if you will owe taxes when you file, be sure to make an estimated tax payment as soon as possible. Penalties and interest began accruing April 15.

Additionally, you may be required to electronically file a Report of Foreign Bank and Financial Accounts (FBAR). This is not filed with the IRS, but FinCEN, an international agency. The deadline is June 30 and cannot be extended.

You should file an FBAR if:

1) You had a financial interest in or signature authority over at least one financial account located outside of the United States

2) The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported

Read more about who has to report about their foreign bank and financial accounts. It is not only expats.

More Questions?

Here are some of the top expat topics with answers:

Which expats need to file a tax return?

What if I haven’t been filing returns?

What happens when an expat sells a home?

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