While graduating from college may get you out from under your parents’ roof, it may not get you out of their taxes. Under the IRS rules for dependency, many college graduates may still be considered a dependent of their parents for tax purposes, and therefore can be claimed on their parents’ tax returns.
If your parents can claim you as a dependent, you cannot claim the personal exemption on your own return. This is the case even if your parents do not actually claim you as a dependent on their own return or don’t file a return at all.
When trying to determine if you can take the personal exemption or if your parents can claim you as a dependent, the two most important factors are your income level and the amount of support your parents provide for you.
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 ($4,000 for 2015; $4,050 for 2016).
- The parent provides more than one-half of the child’s total 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.
A qualifying relative is not required to share the same home as the parent to qualify as a dependent. Therefore, even a recent college graduate living in a different city can be claimed as a dependent by their parents if the grad, for example, makes very little money at their unpaid internship and is still mostly supported by mom and dad.
Since you are prohibited from taking the personal exemption if your parents are able to treat you as a dependent, there is a possibility that no one will benefit from your personal exemption if your parents do not in fact include you as a dependent or do not file a return. In this situation the easiest way to avoid this predicament is to try and bump up your gross income or provide more than half of your own support.