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Member
brittanymariie1
Posts: 1
Registered: ‎02-02-2014

Explain question on personal situationa:Did you have earned income of more than half your support

Student: Yes

Full time: No

I cant be claimed as dependent

Atleast one parent was alive Decemember 31,2013: YES

 --> HELP EXPLAIN THIS QUESTION --> Did you have earned income of more than half your support?

what does that mean.. what does it mean to select yes .. or no for the answer

 

Valued Pioneer
Nangasaurio
Posts: 15
Registered: ‎02-01-2014

Re: Explain question on personal situationa:Did you have earned income of more than half your suppor

It means: did *YOU* pay more than 50% of your living expenses last year (rent, food, utilities, vehicle...anything in order to survive), or did someone else?

Associate
GaryF
Posts: 410
Registered: ‎03-17-2013

Re: Explain question on personal situationa:Did you have earned income of more than half your suppor

Hi, Brittany, and welcome to the Community.

 

You have run into the "Kiddie Tax" questions.  I call them that because that's how they started, but currently they apply to three specific things:

  1. The Kiddie Tax proper
  2. AMT
  3. The refundable part of the American Opportunity Credit.  This is the big one for many college students.

The idea behind the Kiddie Tax is to prevent parents in a high tax bracket from shifting investment income into a lower tax bracket by putting it into their children's names.  That's why the "one parent was alive" question is there.  

 

Until about five years ago, this only applied to children under 18.  When Congress expanded it to college students between 18 and 24, they created a bit of a compromise.  The compromise is this:  If you're working enough to provide at least have your own support, then the kiddie tax rules do not apply to you.  It doesn't matter if you actually use your earnings to support yourself; it's enough that your earned income was enough to pay at least half your living expenses.  If you didn't earn that much, then you are subject to the kiddie tax rules.  Your earned income is usually your wages plus any self-employment or farm income; see the Form 8615 instructions for more details.

 

If the correct answer to the question for you is yes, then you don't have to worry about it.  You'll be treated the same as someone older than 24.  If the correct answer is no, then any of your unearned income (interest, investment income, most others) will be taxed at your parent's rate, you might be subject to AMT, and you cannot get the refundable part of the American Opportunity Credit. 

 

I realize this is a lot to absorb.  Feel free to ask any followup questions.