Can I Claim My Daughter as a Dependent if She Works & Goes to School?

A parent's job doesn't end when her child graduates from high school and goes off to college, and the Internal Revenue Service recognizes this. Your daughter is usually still your dependent even if she works, and she can still be your dependent if she goes away to school. The IRS sets some reasonable limits, however. Your 30-year-old can't live in your basement, earn as much or more than you do and take a few college classes without losing her dependent status.

The IRS says your daughter can have her own earnings and still be your dependent as long as she doesn't contribute more than half to her own support. A gray area may exist if she has a good income and gives you money toward her room and board, or uses it to pay her own college expenses. Otherwise, as long as you out-earn her, she usually qualifies. She does have to file her own tax return if she earns more than $5,700 during the tax year. If she files her own return, she can't claim herself as a standard exemption if you can claim her as a dependent.

Your daughter is your dependent if she lived with you at least six months out of the year, but the IRS doesn't consider being away at school as living elsewhere. She can attend school and live away from home for nine months, and those nine months still count as living with you.

Even if your daughter meets the income and residency requirements, you may have a problem claiming her as your dependent if she doesn't meet other criteria. For example, you can only claim her as your dependent until she is 24 years old, and she must be a full-time student. Otherwise, you lose the dependency exemption when she turns 19. If she's still in school when she turns 25, she loses her dependent status, and if she's 21 years old and graduates in June, you can no longer claim her as your dependent. She must be a full-time student at the end of the tax year.

When considering your daughter's earnings and calculating whether she contributes more than half to her own support, you must include any unearned income she may have. For example, if a relative left her a small trust fund and it's kicking off interest, or if you've invested money for her over the years that's producing dividends, both count as income.

Tax laws change occasionally, so before you claim your daughter as your dependent, check with a tax professional to ensure the income limits and other requirements haven't changed.