RESPOND TO THE DISCUSSION POST PLEASE RESPOND TO STUDENT BY NAME (
ORIGINAL DISCUSSION POST
“Helping a Family Develop a Tax Strategy”
• A married couple arrives at your office and is hoping to get tax advice for their situation. They have a 21-year-old daughter whom they support in her full-time college studies. The husband’s mother also lives with them and they support her in her daily living expenses. They don’t understand whether they can report the daughter or mother as dependents and think they may benefit though a ‘married filing jointly’ status because they each make over $150,000 a year. They need your help! What kind of guidance would you provide to them in this situation? What additional facts would you need to know?
When looking into the tax deductions if the parent is paying for the college out of pocket (which I am assuming they are) the tuition costs and the student expenses can be deducted on the parent’s taxes with the Form-1098-T. There are qualifying child rules that have to be followed in this instance for the parents to claim the child as well as long as the child is 24 years of age or younger and has NOT paid more than half of their own support for the year. If the mother and child both file taxes when in the household for any income earned by each of them but not claiming their self then they can be dependents on the married couple’s taxes. I think the idea was to file separate and claim each of the dependents separately but that isn’t necessary. There is also a tax deduction for married couples that can apply for those who are filing jointly. If the income exceeds $100,000 the client is in a different tax bracket and taxes are set up “So that married taxpayers can’t file separately to gain more combined tax benefits then they would be entitled to if they were to file jointly.” (Mcgraw-Hill, 2019)
I need to know more about their assets and more about their income that is coming in including stocks and bonds or corporate bonds. Any sells of goods or property that has happened that could change taxes. More about their personal lives where their income goes including alimony or capital losses or other income made through self-employment. There would need to be added information provided about the incomes of both of the dependents that were in the home and any assets of the dependents. Find out if there are student loans involved or if the tuition and expenses are paid directly out of pocket. If the dependents do file returns on their own due to income earned while living in the home for at the least 6 months or more then they have to NOT claim head of household because each of the dependents will be added to the married couple’s return.
In my opinion, so far I think that they need to file jointly and claim both as dependents for paying for all the support of both people. Also, claiming the tuition expense and college expenses would help with tax deductions as long as the child and the mother has NOT paid half or more of their own expenses for that year. They have to be accounted for living there legally for at the least 6 months in the home. There will need to be more information collected but to file jointly with the credit, earned an income tax credit, the dependents as credits, and the Form 1098-T for tuition paid, I think this is the best idea, to be honest. This is the best advice at the moment that I can give and think of because filing separately there isn’t an additional tax gain but there is another payment of a 2nd return and fees for a 2nd return instead of just 1 return. That is something that has to be looked into sometimes when preparing taxes because the cost of preparation will vary depending on how many returns are filed.
Turbo. 2019. Solved: I paid for my child’s college tuition,… https://ttlc.intuit.com/community/college-education/discussion/i-paid-for-my-child-s-college-tuition-3760-00-is-that-deductible/00/811671
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