My kid just turned 21 and has been in college full time all year. All his living expenses come out of a 529 account that he’s the beneficiary of and I’m the owner of. He also has some income (~$10K for the year) from a W-2 internship. He has been on my Marketplace Healthcare plan all year.
Am I required to claim him as a dependent on my tax return? If so, would I report his income on my return or would he file his own return and indicate that he can be claimed as a dependent on someone else’s return? For next year, would the answer be different if I gifted him some money this and he paid his expenses with that instead of the 529?
Posted by donutello2000
2 Comments
He can be your dependent and file his taxes. As you indicated, he has to declare that he will be claimed as a dependent.
You can give your son in 2025 up to $19,000 per person per year without having to file a gift tax return or use up any of your lifetime exemption.
Money from a 529 plan does not count as support the student is providing for themselves since you’re the owner of the account. In the situation you describe, he’d be eligible to be claimed as your dependent, unless he’s paying for over half of his own support.
On a federal level:
If his only income is the earned income from the internship (~$10k), he’s not required to file a tax return (unless he was paid as an independent contractor, which would almost certainly be a misclassification). If he had any federal income tax withheld, he could file to get that refunded. He’d want to make sure to check the box to indicate that he was eligible to be claimed. As long as he doesn’t have a filing requirement for income tax purposes, you would not need to report his income for the purposes of reconciling your ACA premium tax credits on your return. This is true even if he files a return to get a refund of taxes or to pay SE (self-employment) tax.
On a state level:
He’d need to determine what the filing threshold is. A majority of states start with federal AGI, so he may need to file a federal return to be able to file his state return. That said, even in this case, his income would not need to be included in your ACA reconciliation.