Author Topic: Tax Logic: If you go to college, you're an independent adult at 24.  (Read 5632 times)

Zalo

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...or if you're married, have a kid, go to grad school, are on active duty, are homeless, or are a ward of the state.

What's up with that? What ever happened to the quaint mantra: "you're 18, welcome to adulthood."

Hardly convincing when people 23 or younger are forced to be dependent unless if they're part of a very small minority.

I'm wondering the reasoning behind this, whether It'd be beneficial to circumvent being listed as dependent, and how to do so.

bUU

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Re: Tax Logic: If you go to college, you're an independent adult at 24.
« Reply #1 on: August 23, 2013, 02:39:58 AM »
What's up with that?
The ratio between cost of living and average salary has gone up. Bring it back down and things can probably go back to how you recall them.

HamhockHammock

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Re: Tax Logic: If you go to college, you're an independent adult at 24.
« Reply #2 on: August 23, 2013, 06:10:41 AM »
I wouldn't agree that the tax code makes people dependents. It allows someone to be claimed as one, provided other conditions are met, such as the man-child paying less than 1/2 of his own support. If someone were 18, a student, but paying more than 1/2 of his/her support, then he/she wouldn't be allowed as a "dependent."

If by makes, you mean that it incentivizes certain behavior, then I would agree with you, to a degree.

As for why, the code is replete with tax expenditures ,  many of which are aimed at the middle class and above. The primary purposes are for politicians to stealth enact social policy/engineering and garner votes. In the case of this policy, I would imagine it came about because it is extremely popular (vote getting) to have  all taxpayers subsidize the middle and upper class's practice of caring for their adult children through and beyond college.

avonlea

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Re: Tax Logic: If you go to college, you're an independent adult at 24.
« Reply #3 on: August 23, 2013, 07:08:56 AM »
The government wants parents to be responsible for their child's college education.  Do you know how many 18 year olds would qualify for Pell Grants if they could be classified as independent based upon their personal income and assets alone (not their parents')?

As you stated, Zalo, even if your parents deem you to be on your own, Uncle Sam most likely won't. 

I guess I am an example of that.  I was told by my  parents that I was responsible for coming up with funds for my own education, but I was also told by my parents that I wasn't allowed to go into debt or get a job while in school.  Their income was too high for me to get federal aid in the form of a pell grant. The only option was to get a full scholarship.  (I was a very obedient child and did exactly as they asked with pretty much everything, so taking another path was unthinkable.)  Luckily (and with a lot of work), I was able to obtain such a scholarship, but it definitely limited the options of where I could attend.  I guess I sound a little bitter...sorry.  I do actually think my parents' pushing me to obtain no debt was a good thing in the long run.

It is indeed unfair, but there is no way for the government to know which parents are willing to help their kids and which aren't.  If parents were encouraged not to (by their kids being able to get the government to subsidize their education), many wouldn't. So getting classified as independent is hard. Unfortunately, many parents still aren't helping their kids and these young adults are amassing a lot of debt.  The FAFSA model is based off of a formula from the 1960s when college loans to students were less available and tuition was much lower.

Also, parents who think they can get their children to be listed as independent by having their children leave the house and make it on their own are pretty mistaken. http://www.thecollegesolution.com/deadbeat-parents-who-wont-help-pay-for-college/

« Last Edit: August 23, 2013, 11:04:32 AM by avonlea »

FIence!

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Re: Tax Logic: If you go to college, you're an independent adult at 24.
« Reply #4 on: August 23, 2013, 07:33:04 AM »
Are you talking about FAFSA logic, or income tax filing here? When I went to college, and had no help financially from my parents, I still had to list their income on my FAFSA until age 24, and financial aid was affected by that. I was also living independently at the time, and my tax filing reflected this. So as far as the colleges/grant authorities were concerned, I was not an adult until 24, but as far as taxes were concerned I was an adult at 18, when I was living in my own apartment and filing my own income. My parents could not claim me as a dependent on their income taxes because I had filed for myself.

Now, if I was living in their house and being supported by them, this would have been different as far an income tax filing, but as others have mentioned it then becomes an "option" to be their dependent, not a necessity in the eyes of the government.

avonlea

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Re: Tax Logic: If you go to college, you're an independent adult at 24.
« Reply #5 on: August 23, 2013, 08:09:44 AM »
Ah yes.  Based on the list of who qualified as independent adults, I assumed FAFSA.  Tax code was listed in the title and is a different beast altogether. Thanks for pointing that out FIence.  I'm sorry if I confused you and wrote about something completely unrelated to what you were wanting to know, Zalo.

Spork

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Re: Tax Logic: If you go to college, you're an independent adult at 24.
« Reply #6 on: August 23, 2013, 08:11:53 AM »
Haha!  You used the words "tax" and "logic" right there next to each other!  That's funny.

StarryC

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Re: Tax Logic: If you go to college, you're an independent adult at 24.
« Reply #7 on: August 23, 2013, 10:32:48 AM »
My freshman year roommate was able to qualify as "independent" for the FAFSA.  Her parents had left her to live with her older sister for 4 years of high school.  They left and lived in a boat with no phone or address and didn't work.  She was unable to get them to communicate with her to provide their tax information.  I don't know how she proved it to the financial aid officer though, perhaps affidavits from her sister, teachers, or others?  I do think most of those things had to be done while she was still in high school, and possibly still a minor, rather than when she was ready to start college.

Anyway, I think that I'd prefer to have loving parents who are willing to care for me and emotionally support me and even let me live with them during college, even if they don't provide me money, than have parents who I can prove to an official aren't involved enough to get them off of my FAFSA. 

If this really frustrates you, I'm sure you could find someone for a mutually beneficial 4 year marriage/ roommate agreement. 

avonlea

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Re: Tax Logic: If you go to college, you're an independent adult at 24.
« Reply #8 on: August 23, 2013, 11:28:01 AM »
Anyway, I think that I'd prefer to have loving parents who are willing to care for me and emotionally support me and even let me live with them during college, even if they don't provide me money, than have parents who I can prove to an official aren't involved enough to get them off of my FAFSA. 

Of course, I would prefer this for a student as well.  My parents did show some emotional support--I won't get into that, but it wasn't very much. They also gave me a little pocket money once in a while.  However, I lived on campus during the school year (dorm room covered by scholarship) and at a camp working as a dishwasher in the summers.  I stayed at my parent's home for small breaks, so about one month out of the year in total.  If a student truly isn't relying on their parents for financial support (for tuition or living expenses) but have parents who make a decent income, they are unable to rely on the same benefits as a student whose parents also do not financially support  them (if so, probably not with much) but have lower income.  That is what I am wondering is so hard for the OP emotionally. 

And if the OP is upset by taxes, I understand that as well.  For parents to not help their college aged children with expenses and then claim them as dependents at tax time...well, that's not very nice, I'll put it that way.
« Last Edit: August 23, 2013, 09:03:07 PM by avonlea »

bUU

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Re: Tax Logic: If you go to college, you're an independent adult at 24.
« Reply #9 on: August 23, 2013, 12:33:15 PM »
My freshman year roommate was able to qualify as "independent" for the FAFSA.  Her parents had left her to live with her older sister for 4 years of high school.  They left and lived in a boat with no phone or address and didn't work.  She was unable to get them to communicate with her to provide their tax information.  I don't know how she proved it to the financial aid officer though, perhaps affidavits from her sister, teachers, or others?
I thought the rules stated explicitly that those things wouldn't matter. It seems that if they went to the effort of stating that only one of a dozen conditions would satisfy, that they wouldn't turn around and then just accept something less stringent. What's the real story?

StarryC

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Re: Tax Logic: If you go to college, you're an independent adult at 24.
« Reply #10 on: August 23, 2013, 01:26:05 PM »
I guess I don't know the "real story," but just what she told me. I do see this as a qualification though: "Be a student for whom a financial aid administrator makes a documented determination of independence by reason of other unusual circumstances."  Or, perhaps there was some sort of legal thing to make her a foster child and her sister her foster parent/ legal guardian?  Ooh, maybe she was secretly married and I didn't know it! 

I think that the idea is that people with wealthy parents, on average, do more to support the child going to college than poorer parents, even if that support is emotional, encouragement, knowledge about the college process, financial support only during the summer, better high school education, SAT prep help, etc.  My parents didn't help me out with tuition or living expenses either, and I never moved back in with them after I went to college, but I could have. I was offered no "need based" financial aid to my state college, and only unsubsidized loans. 

However, because they provided a stable home for my first 18 years, healthy food, a car so I could get a job and go to activities in HS, and encouragement to do well in school and go to college, paid for me to take the SAT, and bought me sports equipment so I could be "well rounded," I got merit based scholarships.

But perhaps unfairness is the first lesson of college:  Everyone didn't grow up the same way you did, and everyone has different inborn and circumstantial advantages and disadvantages, and life is incredibly unfair, from here on out! 

Zalo

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Re: Tax Logic: If you go to college, you're an independent adult at 24.
« Reply #11 on: August 23, 2013, 04:22:17 PM »
I will be leaving to college two days from now; my room & board, tuition, meal plan, and health insurance are paid for via financial aid/scholarships/grants. I just need to come up with some extra money for books and other minor expenses. I decided I'd get a campus job, and to do this I had to file a W-2 and some other tax forms, which brought about me questioning the idea of independent and dependent, and how to avoid having my wages 'withheld'.

Although my parents have made many financially unwise decisions--which allows me to have an EFC of 0--they are caring and provide emotional support. I would simply rather list myself as independent because it'd make my life simpler, and I'd be able to accumulate ~9k a year without being income taxed, as opposed to only ~6k a year if I list myself as a dependent.

Considering that the college is essentially paying for most of my living expenses, can I list myself as an independent?

avonlea

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Re: Tax Logic: If you go to college, you're an independent adult at 24.
« Reply #12 on: August 23, 2013, 08:21:35 PM »
Quote
Chapter 3 of IRS Publication 17 describes the criteria for a child to be considered a dependent on the parentís income tax return. Generally, a child must be under age 19 or a full-time student for at least 5 months during the year to be considered a dependent for federal income tax purposes. The child must have lived with the taxpayer for more than half the year, notwithstanding any temporary absences for illness, education, business, vacation or military service. The child must not have provided more than half of his or her own support. (Note that scholarships do not count when determining how much support was provided by the child.) Multiple support agreements allow divorced parents to decide which parent can claim the child as a dependent.

Zalo,  I don't think that you will be able to claim yourself as an independent, at least not this upcoming April since you lived at home with your parents for most of this year and they have supported you for at least half of the year. 

For your future years, to claim your own deduction you have to prove that you provided over 1/2 of your support and scholarships cannot be considered.  Do you think that your earnings would be enough to be considered as such?   

There are families who work out a situation to help their children--the parents claim their child as a dependent at tax time and share some of the refund with him/her.  Perhaps your parents would be open to this. 

I am not a CPA or tax attorney, so I would encourage you to talk with someone who absolutely understands your situation.  I don't think you will get super great tax advice on this thread.  I read somewhere that attorneys are not allowed to explain tax law over the internet--I don't know absolutely if that's true or not, but that could be why a professional has not yet responded.  I have tried to keep up with all of the FAFSA rules since my oldest might be starting school in seven or eight years.  I attended school from 1997-2001, so I'm sure a lot has changed with the tax laws.  I would suggest that you talk with the financial aid department at the university.  If they don't the answer, perhaps they can point you to someone who does. 

Good luck with college!  I hope you have a great time!
« Last Edit: August 23, 2013, 09:04:47 PM by avonlea »

bogart

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Re: Tax Logic: If you go to college, you're an independent adult at 24.
« Reply #13 on: August 23, 2013, 10:35:44 PM »
What ever happened to the quaint mantra: "you're 18, welcome to adulthood."

Coming from a young man who, I surmise, at age 19 is about to move out his parents' house to go to college at other people's expense, I'd say this question pretty much answers itself, no offense intended.  Heck, I did what you're doing (lived at my folks' home until I went to college not to mention the summers thereafter while I was in college, accepted what aid I qualified for), but I didn't imagine myself to be independent, because I -- wasn't.

Hardly convincing when people 23 or younger are forced to be dependent unless if they're part of a very small minority.

I'm wondering the reasoning behind this, whether It'd be beneficial to circumvent being listed as dependent, and how to do so.

No one's forcing you to be dependent.  You're dependent this tax year (2013) because, well, as I already said, because you're -- dependent.  Someone else has provided your housing and support for the bulk of the year; ignoring the question of whether the scholarship should or shouldn't count as your providing for yourself, you've got 8 months of the year when your parents are providing for you, and 4 when they're not.  As dependent is an either/or status, which would you say best characterizes your 2013 status?

If you don't want to be your parents' dependent in 2014, don't be.  Don't live in their home and don't accept financial support from them (if it's offered/available).  How that will play out for the FAFSA I don't know (as noted in comments above mine, there are logical reasons why the system is stacked against parents who are willing/able to pay for their kids to go to college avoiding needing to do so), but in terms of your income tax status, as long as your parents don't pay 50% of your support (I suspect based on this link:  http://www.finaid.org/educators/irsdependent.phtml that the scholarship counts neither as "their" support nor "your" earnings, though I'm no tax expert, so you just need to cover 51% of the balance.  Per that same link, "Support includes food, clothing, shelter, education, medical and dental care, recreation, and transportation.").

Zalo

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Re: Tax Logic: If you go to college, you're an independent adult at 24.
« Reply #14 on: August 23, 2013, 10:57:26 PM »
What ever happened to the quaint mantra: "you're 18, welcome to adulthood."

Coming from a young man who, I surmise, at age 19 is about to move out his parents' house to go to college at other people's expense, I'd say this question pretty much answers itself, no offense intended.  Heck, I did what you're doing (lived at my folks' home until I went to college not to mention the summers thereafter while I was in college, accepted what aid I qualified for), but I didn't imagine myself to be independent, because I -- wasn't.

Hardly convincing when people 23 or younger are forced to be dependent unless if they're part of a very small minority.

I'm wondering the reasoning behind this, whether It'd be beneficial to circumvent being listed as dependent, and how to do so.

No one's forcing you to be dependent.  You're dependent this tax year (2013) because, well, as I already said, because you're -- dependent.  Someone else has provided your housing and support for the bulk of the year; ignoring the question of whether the scholarship should or shouldn't count as your providing for yourself, you've got 8 months of the year when your parents are providing for you, and 4 when they're not.  As dependent is an either/or status, which would you say best characterizes your 2013 status?

If you don't want to be your parents' dependent in 2014, don't be.  Don't live in their home and don't accept financial support from them (if it's offered/available).  How that will play out for the FAFSA I don't know (as noted in comments above mine, there are logical reasons why the system is stacked against parents who are willing/able to pay for their kids to go to college avoiding needing to do so), but in terms of your income tax status, as long as your parents don't pay 50% of your support (I suspect based on this link:  http://www.finaid.org/educators/irsdependent.phtml that the scholarship counts neither as "their" support nor "your" earnings, though I'm no tax expert, so you just need to cover 51% of the balance.  Per that same link, "Support includes food, clothing, shelter, education, medical and dental care, recreation, and transportation.").

In my original comment I was talking more about young people in general, and then relating the tax code to myself... perhaps misguidedly imagining some bitter 23 year old listing himself as dependent when he's living in his own apartment and working some hot-shot job.

You bring some very interesting and straightforward points; as of this moment forward, I (ideally) do not plan to accept financial assistance from my parents. As for 2013, I definitely agree with you, I was logically dependent the majority of the time.

Actually, I'll still be dependent these 4 years, except instead of dependent on parents--I'll be dependent on the college. How strange life is.

How independence or dependence will play out with FAFSA, I do not know either; I'll ask the financial aid office.
« Last Edit: August 23, 2013, 11:02:48 PM by Zalo »

bUU

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Re: Tax Logic: If you go to college, you're an independent adult at 24.
« Reply #15 on: August 24, 2013, 02:09:48 AM »
I think people are getting caught up in the dictionary definitions of words. Often words are used, or applied, to situations where the dictionary definitions of those words don't match the actual reality of the use of those words.