Example:  Mom and Dad have an AGI (Adjusted Gross Income) of $120,000, they also have one college age child (age 20).  This child has wages of $3,000 and Unemployment of $12,000.

If mom and dad claim their child and use the education credit their federal tax would be $9,530.  If they don’t claim their child their federal tax would be $12,530.  So they would save $3,000 by claiming their child.

Now we have to look at the child’s return.  Based on the income above the child would have a tax of $2,336 if mom and dad claim them.  Their tax without mom and dad claiming them would be $0 and they would also have refundable credits of $1,000 education and $1,200  first stimulus payment for a refund of $2,200 with no withholding coming into play.

So mom and dad would save $3,000

Child would save $4,536

So in this situation if would be better if the college age child claimed him/herself by $1,536 plus then the college child would become eligible for the second stimulus payment of $600 and possibly a 3rd stimulus payment if the government votes in favor of it.  So then the savings could be about $3,500 for the family.

Remember each situation is unique to the family so this year we are recommending that the parents and their children come in together to make sure that the best answer is calculated.   If the parents are worried about getting their share of their child’s refund they can use Form 8888 on their child’s return to split the refund between them and their child.

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