Wednesday, July 8, 2015

Plan Now, Save Later: What To Do After Your Child Graduates

Cathy A. Robinson, CPA
Senior Manager
Do you have a child that recently graduated from college? Maybe you have a child who will be graduating within the next year.  Did you know that your taxes could be impacted?

Once a child is no longer a full-time student, you may not be able to claim them as a dependent. If you’re a single parent that claims head of household filing status, this is especially important for you.   Should your child find a job within six months of graduating you are no longer able to claim them and use the head of household filing status as they will most likely have earned more than $4,000. Your tax filing status will go from head of household to single and the credits you normally could qualify for will no longer apply. In order to make sure you don’t end up owing at the end of the year, be sure to talk to your accountant about making the necessary adjustments to your withholding and estimated tax payments should this situation apply to you.  

This doesn’t necessarily mean that you can’t continue to claim them after they graduate college. This is when the support test comes into effect. If the child cannot provide half of his or her own support then you can claim them. They’re considered a relative dependent. If the child’s gross income for the year is only $4,000, you can claim them.