Dependent?

Discussion in 'Military Academy - USMA' started by mtnman17, Mar 3, 2011.

  1. mtnman17

    mtnman17 USMA Appointee 2015

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    My parents were wondering if I will still be considered a 'dependent of theirs' while at USMA, for tax purposes I believe. Thoughts?
     
  2. djfrro

    djfrro Member

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    the answer to that is No
     
  3. jocomom

    jocomom Member

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    The answer is "it depends" for the first year. Since you don't report until late June, it is possible that your parent(s) may provide more than 50% of your support during the calendar year and thus be entitled to claim you as a dependent. The key is careful record keeping.

    After your first year you cannot be claimed as a dependent. Once you enter an SA you are considered on active duty and therefore not a dependent. Further your appointment is not considered a fellowship or scholarship and it treated as payment for services.
     
  4. buff81

    buff81 Moderator

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    Guidance comes out from West Point about this.

    **DISCLAIMER** Our personal experience only:
    Our accountant did not count DS as a dependent Plebe year. The thought was that you would have to send your DD/DS to a VERY expensive prep/private school Senior year to spend more than what West Point spends on your kid from R-DAY to Dec. 31 of Plebe year.

    Best advise is to read what West Point publishes about this and you and/or your accountant make the determination based on that.
     
  5. singaporemom

    singaporemom Member

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    Which brings a new question....will Mids be needing to file income tax forms?
     
  6. buff81

    buff81 Moderator

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    Yes. They are earning an income.
    DS got quite a nice refund too last year!
    West Point helps them file their taxes.
     
  7. mom3boys

    mom3boys Parent

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    Your mid/plebe should be getting briefed on this. They may not have shared it with you. They are big boys and girls now, and no longer on our taxes...you need to have a conversation with him/her about this soon...makes a mess if you both claim him/her.
     
  8. America's Finest

    America's Finest USMA Cadet

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    MEMORANDUM FOR FOURTH CLASS CADETS

    SUBJECT: Income Tax Information



    1. Many of you as fourth class cadets have questions concerning the income tax consequences of cadet pay and allowances. This memo provides information from the standpoint of both your tax return and your parents’ return for 2009. It is very important that you share this data with your parents.

    2. This memo is based on the tax laws and current rulings of treasury officials. It is, however, informative only and does not necessarily reflect the official position of the Internal Revenue Service or the Department of the Army.

    3. All cadets at the Academy must file their own income tax returns. Each fourth class cadet who entered the Academy on 29 June 2009, and remained through 31 December 2009, has received or had credited to their account during 2009 base pay of $5,395.61. Cadets must report this amount as income from the Army. In addition, each cadet received a $6,360.00 pay advance to assist with the payments of uniforms, textbooks, computer, software and various school fees.

    4. Your parent(s)/guardian(s) must have contributed more than half of your support for the year in order to claim you as an income tax exemption “More than half the support” refers to dollar value, and not to the length of time support was furnished. Your parent or guardian may properly include the cost of board, clothing, lodging, medical and dental care, education, property and furniture, insurance, etc., they furnished you when they calculated their level of support. If you lived at home during the first six months of 2009, your parent or guardian may include a proportionate amount of the family food bill, utilities, rent or house payments, interest, taxes, etc., as part of your support. If you attended college, prep school, or high school prior to entering the Military Academy, your parents may also include the amount they paid for tuition, books, school supplies, and transportation to and from school as parental support.

    5. In determining the value of support furnished from sources other than your parents, you must include both taxed and untaxed support amounts. This simply means that the portion of your taxable pay spent on your own support must be included, and in addition, the support provided by the Army in the form of food, lodging, education and other services must also be included. Even though the value of Army support is not taxed as income, the value must be considered when determining who provided more than half of your support. The following chart indicates values of support furnished by you and by the Army.

    MARM-FO-MA-T (1)
    SUBJECT: Income Tax Information



    Cadet Pay earned from 29 June through 31 December $5,636.36
    Government Pay Advance 6,360.00
    Subsistence (food) (186 days x $10.80 per day)
    29 June through 31 December 2,008.80
    Education (the actual 2008 tuition cost per semester
    at the U.S Military Academy) 25,786.00

    TOTAL SUPPORT BY THE CADET AND BY THE ARMY $39,791.16

    6. In our opinion, if your parent has not provided at least $39,791.16 in support, then your parent may not be able to claim you as an exemption. If your parent has provided more than this amount in support, then your parent is entitled to claim you as an exemption. Under IRS regulations, if your parent can claim you, you cannot claim a personal exemption for yourself, and you will have to complete a worksheet to compute your standard deduction.

    7. The question may arise whether an appointment to the Military Academy can be considered a “scholarship award” within the meaning of the income tax laws. The Internal Revenue Service has ruled that such an appointment is not a scholarship award and that the education provided by the Military Academy must, therefore, be included as an item of support furnished by the Army.

    8. I trust that the information provided, although necessarily general in nature, will be of assistance to you and your family. The above information is provided to ensure that you and your parent(s)/guardian(s) have sufficient data to calculate income tax returns.

    9. Any questions by your parent(s)/guardian(s) concerning the proper methods of calculating dependency should be resolved through independent legal counsel, Publication 17, and/or contact the Internal Revenue Service.





    THOMAS M. REMO
    Treasurer, USMA
     
  9. Melosh3

    Melosh3 Member

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    As far as taxes go, do you file taxes under your home state? Or under New York?

    I am from Texas, and there are no state income taxes :D
     
  10. America's Finest

    America's Finest USMA Cadet

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    Your home state. You are stationed at West Point but still a resident of your home state unless you change it. Great deal for Florida and Texas. :wink:
     
  11. mtnman17

    mtnman17 USMA Appointee 2015

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    This is EXACTLY the information I was looking for, thanks a ton guys!
     
  12. BigBear

    BigBear Class of 2015

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    When do you decide which state you will file your taxes under?
     
  13. Melosh3

    Melosh3 Member

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    That is quite amazing, would you keep that the whole time you are at wp until you get stationed elsewhere I guess (like your first duty assignment)
     
  14. America's Finest

    America's Finest USMA Cadet

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    You would file them under your home state as soon as the tax window is open for filing taxes. I don't know what "decision" you are referring to.

    I'd wait on Scoutpilot to confirm but I believe you may keep your original state residence as long as you want no matter where you get stationed while in the Army.
     
  15. Casey

    Casey USMA 2015

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    My dad who is Army has been able to keep his state of residence as the state for tax purposes no matter where we moved and said that you are able to change it, I think its like only able to be done once, if you would like. That state has to agree to allow you to make the change (some states require you to have actually lived for a certain period of time in teh state to change it to state of residency for military while others have different requirements is my understanding). Just my experience living as an Army brat, and obviously, I wouldn't have all the facts considering parents file their own taxes :shake: I bet Scoutpilot could give better details.
     
  16. BigBear

    BigBear Class of 2015

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    @AF - I thought you got to decide which state you file taxes under as part of being in the military. That's what I was redeeming to...for example, if I want to claim Florida as my residence even though I'm from Maryland for tax purposes
     
  17. kp2001

    kp2001 USMMA Alumnus

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    You do not get to "decide" as you state above. You can keep the residence of your "home of record" (ie the state you entered service from), or you can change it to any state that you are legally a "resident" of. Meaning, if you get stationed in Florida and can prove that you meet the requirements of being a resident there then you can apply for and change your state of residence to Florida. You can then keep that as long as you like while in the military. Most states require you to simply be living there and claim that you want to return there.

    You cannot, for example, be from Maryland, stationed in New York and claim Florida/Texas/Nevada/Alaska/etc. Once you are stationed in one of those states then it is usually beneficial to change your residence; however, many states also allow those on active duty, not living in their state, to not pay income tax. (I believe New York is one of those that allows this)
     
  18. USNA79USMMA17

    USNA79USMMA17 USNA79USMMA17

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    Can most parents of service academy students claim them as dependents? YES

    My parents received a letter from USNA early in 1976, stating what is the consensus of the comments on this thread: that for the previous calendar (the 1st half of my plebe year) year my parents could claim me as a dependent, but that I was now "independent" and that in 1976 and later, they could not. It seemed to make sense (as do the posts in this thread) and they did not claim me as a dependent after 1975. However, with my child now a plebe at USMMA, I've needed to consider this issue for myself, and applying my years of professional experience preparing income tax returns, I've come to the opposite conclusion. As long as the service academy student is under age 24 and lives in the parents household when not at the academy or away for other military duties, I believe the parent is entitled to claim the child as a dependent. The error in all of the posts, including the apparently conclusive one from the USMA Treasurer, is using the WRONG "Support Test" in trying to answer the question.

    There are two IRS defined dependency categories: Qualifying Child and Qualifying Relative. Each has seven tests which must be met, and both include a "support test," but the support test is different for the two categories.

    The support test for qualifying child is "The child cannot have provided over half of his or her own support" during the tax year.
    The support test for qualifying relative is "The taxpayer must have have provided over half of the relative's support" during the tax year.
    If you read all the posts, they apply the wrong support test, the one for a qualifying relative, conclude correctly that very few if any parents of service academy students can meet this test, and incorrectly conclude that parents cannot claim service academy students as dependents on their tax returns.

    The correct assessment has to consider the seven tests for qualifying child, and if you pass all seven, claim the child as a dependent. (Please note that these seven tests DO NOT include the Gross Income test required to be a qualifying relative. Some of the posts incorrectly assume that because they are being paid a monthly salary by the military services (unfortunately not true of USMMA students), that this income makes them independent).

    Apply the seven tests for a QUALIFYING CHILD:
    Test 1: Is the taxpayer (i.e., the parent) a dependent of another person? If YES, you fail the test and cannot claim the student as a dependent. If NO, proceed to
    Test 2: Is the dependent filing a joint return with a spouse. If YES, they wouldn't be at an Academy, so obviously NO and proceed to
    Test 3: Is the dependent either a US citizen, US National, or a resident of the US, Canada, or Mexico. If YES, proceed to
    Test 4: Is the child the taxpayer's son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendent of any of these? If YES, proceed to
    Test 5: Member of household test. The child must have lived with the taxpayer for more than half of the tax year. (Please note that during "temporary absences" such as to attend school or for miltary services, the child is considered to be living with the taxpayer). So YES and proceed to
    Test 6: Age test. The child must be EITHER under age 19 at the end of the tax year OR under age 24 at the end of the tax year and a full-time student for any part of at least 5 months during the tax year. If YES, proceed to
    Test 7: Support test. The child cannot have provided over half of HIS or HER OWN SUPPORT during the tax year. So, if your academy student meets this test, CLAIM THE CHILD AS YOUR DEPENDENT. Specifically, the parent does not have to provide over 50% of the students support (wrong support test) and support provided by a 3rd party, such as a military service or the Academy beyond the taxable pay to the student, is not support provided by the student. The taxable pay actually used by the student for their own support must be considered, but this amount pales in comparison to that being provided by the parents and the Academy, so I don't see how any academy student who was not independent before going to the acaedemy could fail this test.

    So my conclusion, if you accurately apply the CORRECT seven tests to your child at one of the service academies, I conclude that almost every parent is entitled to claim their academy child as their dependent on their income tax return. The tests most likely to be failed by some academy students (those with prior military service prior to entering the academy) would be the age and member of household tests, and if those are failed then the seven tests for qualifying relative can't be met for them either, so for those few students, the parents cannot claim them as dependents.
     
  19. kinnem

    kinnem Moderator

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    ^^^^^
    I concur. Consider this scenario. A child is at a private institution where he/she has a full scholarship covering tuition, room and board, books and fees. The child also has a part time job and a summer job yielding income to the student. I can still claim him as a dependent provided we all pass the tests. Of course room and board is treated as imputed income to the student so that must be taken into account and my spending (it seems to me) must exceed that. That is not out of the question if I'm covering cell phone bills, car insurance and health insurance (the last not being applicable to someone at one of the Academies). It could be a tough set of tests to pass, but not totally out of the question.
     
  20. MemberLG

    MemberLG Member

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    Maryland is not one of those states.
     

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