Tax Question

Discussion in 'Air Force Academy - USAFA' started by Lifeisgood, Apr 6, 2010.

  1. Lifeisgood

    Lifeisgood Member

    Joined:
    Feb 5, 2009
    Messages:
    53
    Likes Received:
    0
    Can parents claim their cadet as a dependant for their first year at the academy since they are home for half of the year Jan 1 - June 24 before leaving for BCT.
     
  2. CadCandMateus

    CadCandMateus Recent Grad

    Joined:
    Mar 1, 2007
    Messages:
    600
    Likes Received:
    13
  3. 2011's Mom

    2011's Mom Parent

    Joined:
    Jun 22, 2006
    Messages:
    303
    Likes Received:
    1
    it's complicated. If you're looking at Jan 1 - June 24 as half the year, it's actually not (you'd have to go all the way through June). But the real issue is fiscal and every family is different. Those that I know, ourselves included, were not able to claim their cadet during the 4° year. You should talk with your tax representative to get their answer on that score. Also, USAFA does publish info about the cost USAFA for purposes of taxes. Here is a cut/paste of a prior newsletter which addresses it (from a few years ago when it applied to my family - I don't know if/where a more current one is but assume it is similar. I am pasting the entire article even though some does not apply to the specific question but others may find it helpful.

    Tax Withholding
    Federal and State tax withholding will be started at the filing status of single with one exemption. The state of legal residence will be automatically input based on the home of record on file for the student. Cadets may change their state for tax withholding at any time by completing a State of Legal Residence Declaration in the Cadet Pay office, located in Vandenberg Hall, room 3C24. All cadets at the Academy are required to file their own income tax returns. As a fourth-class cadet entering the Academy in June 2008, you will receive or have credited to your account during 2008 approximately $5,100 which you must report as income from the Air Force.

    Dependency Exemption
    Once you become a cadet at the Academy, you are considered a member of the active military, and are no longer dependent upon your parents for support. You are considered supported by the Air Force or by yourself. (See IRS Publication 17.) However, since as an entering fourth-class cadet you were probably a dependent of your parents for half of the year before you entered the Academy, you may possibly be claimed as a dependent on
    their return for that year. In order to claim you as an income tax exemption your parents must have contributed more than half of your total support for the year. "More than half of support" refers to dollar value, and not to the length of time support was given. Following the steps below will help determine whether the "more than half of support" test is met. NOTE: Effective 1 January 1987, if you can be claimed as a dependent on the tax return of another taxpayer, then you may not claim yourself as a personal exemption on your tax return. Thus, if you are claimed on your parents' return, you may not claim yourself as an exemption when you file your own return for that year. After the fourth-class year when your parents may no longer claim you as a dependent on their return, you may claim yourself as an exemption when you file your own tax return.

    Compute the value of support contributed by your parent or guardian in 2008.

    Compute the value of support contributed by you and your parents or guardians and others (include support provided by the USAF).

    You can use Worksheet 3-1, Worksheet for Determining Support, located on pg 33 in IRS Publication 17 for your calculations.

    Compute the value of support contributed by your parent or guardian in 2008.

    Compute the value of support contributed by you and your parents or guardians and others (include support provided by the USAF).

    You can use Worksheet 3-1, Worksheet for Determining Support, located on pg 33 in IRS Publication 17 for your calculations.

    Compare your parents' or guardians' share of the total with that provided by you, the Air Force, or others. If your parents' or guardians' share is more than 50 percent of your total support, they meet the support test and can take the dependency exemption in your freshman year only. In determining how much your parents or guardians contributed to your support, a parent or guardian may include the cost of clothing, medical, and dental care, education, medical insurance premiums, transportation, entertainment, Christmas presents, etc., for you. If you lived at home during the first six months of 2008, a proportionate amount of the family food bill and utilities, fair rental value of lodging furnished, etc., may also be included.
    Educational expenses might include cost of tuition, books, board, and lodging, school supplies, and transportation to and from school if you attended college, preparatory school, or high school prior to entering the Air Force Academy.

    In computing the value of support furnished you from sources other than a parent or guardian, both taxed and untaxed amounts must be included. Your taxable pay must, of course, be included. In addition, the fair value of the food, lodging, medical care, education, and other services furnished you by the Air Force must also be included even though their value is not taxed as income to you.

    The Internal Revenue Service has ruled that an appointment to the Air Force Academy is not a scholarship. Thus, the cadet must include value of the education as support from sources other than the parents or guardians. The amount of support contributed by the cadet for one semester of education, food, lodging, cadet pay, etc., is $11,000. Compare this figure to the amount of support provided by the parents. If the parents' figure is higher, then the parents can claim the cadet as a dependent on their income tax return and the cadet cannot claim a personal exemption. If the $11,000 figure is larger than the amount provided by the parents, then the cadet will claim a personal exemption on his or her income tax return, and the parents cannot claim the fourth-class cadet as a dependent on their income tax return.


    And more info on the value of the USAFA share:

    The USAFA CoE amount may be exempt from the 10% additional tax IAW IRS rules
    (see IRS Publication 970). The CoE at a service academy is defined in DoD 1332.23
    as: “Those costs that are attributable directly to educating a person at a Service academy under
    regulations prescribed by the Secretary of the Military Department concerned and approved by
    the Office of the ASD (FM&P) (OASD (FM&P)) and the Office of the Assistant Secretary of
    Defense (Comptroller) (OASD(C)). Such costs include a reasonable charge for the provided
    education, books, supplies, room, board, transportation, and other miscellaneous items
    furnished at government expense. Excluded are the costs for cadet or midshipman pay and
    allowances, under 37 U.S.C. 201 (reference (j)), for uniforms, military training, and support for
    nonacademic military operations.” Also, reference AFI 36-2020 and 10 U.S.C. 2005 for
    additional information. The following amounts are the USAF Academy cost of education for
    the Fiscal Year (FY) indicated. The FY is 1 Oct – 30 Sep.

    FY2003: $38,038
    FY2004: $35,564
    FY2005: $39,212
    FY2006: $40,079
    FY2007: $42,333
    FY2008: $41,925

    The FY 2009 Cost of Education has not been finalized. This information should be
    available during the month of March 2010.

    The following is additional information on tuition, room, board and cadet income and
    expenses at USAFA:

    - USAFA cannot charge for tuition, room or board in accordance with 10 U.S.C. 4360.
    Tuition, room and board are provided to cadets without charge.

    - Cadet monthly base pay is $929.40 effective 1 Jan 09 and $960.90 effective 1 Jan
    10. Cadet pay is equal to 35% of a 2nd lieutenant pay in accordance with 37 U.S.C. 203(c).
    - Cadet estimated expenses for Academic Year 2009/2010 (1 Jul 09-30 Jun 10) are:

    Expense Freshman Sophomore Junior Senior
    Uniforms 4,020 360 590 790
    Computer 2,312 72 72 66
    Personal Service Fees 1,474 405 405 390
    Arts and Athletic Fees 170 170 170 170
    Media and Textbooks 2093 1,269 1,269 1,355
    Total $10,069 $2,276 $2,506 $2,771

    Definitions:
    Personal Service Fees include barber, tailor, linen, dry cleaning and laundry.
    Arts and athletic fees include reduced tickets to shows and sporting events.
    Media includes KAFA radio, basic training yearbook and freshman yearbook.

    NOTE: Exact expenses are known only by the individual cadet based on their specific
    circumstances. The amounts shown above are only an estimate. The individual cadet
    receives a monthly Leave and Earnings Statement (LES) which provides information
    on actual expenses.

     
    Last edited: Apr 6, 2010
  4. Just_A_Mom

    Just_A_Mom Member

    Joined:
    Jul 9, 2006
    Messages:
    4,826
    Likes Received:
    2
    Not quite.
    Read the IRS publication 501 about the dependency test. There are 5 qualifying criteria ALL of which must be met.
    In a nutshell, one of those is the "support test" which says you must provide more than 1/2 of the childs total support during the calendar year. Support is calculated in dollars not time.
    http://www.irs.gov/pub/irs-pdf/p501.pdf
     
  5. Just_A_Mom

    Just_A_Mom Member

    Joined:
    Jul 9, 2006
    Messages:
    4,826
    Likes Received:
    2
    x-posted with 2011's Mom most comprehensive post! :smile:
     
  6. Lifeisgood

    Lifeisgood Member

    Joined:
    Feb 5, 2009
    Messages:
    53
    Likes Received:
    0
    Thanks for your help.
     
  7. packermatt7

    packermatt7 USAFA Cadet

    Joined:
    May 8, 2008
    Messages:
    804
    Likes Received:
    1
    Don't you love tax codes that are thousands of pages longs?
     
  8. eagle36

    eagle36 USAFA Alumnus

    Joined:
    May 5, 2007
    Messages:
    295
    Likes Received:
    0
    i know many parents who justify covering over half the cost to support their child and claim them their first year. if you can justify it, you're fine.
     
  9. Stealth_81

    Stealth_81 Super Moderator Moderator Founding Member

    Joined:
    Jul 20, 2006
    Messages:
    1,663
    Likes Received:
    509
    Lifeisgood,

    One thing to remember is that if you claim your cadet, his scholarship from your employer will become taxable income, and he will have to pay the taxes on it. Since the check is made out directly to him, and he will not be able to claim himself on his own taxes, and he will not be able to demonstrate any expenses for college, he must declare it as income.

    This post is directed at Lifeisgood, although it may apply to other scholarships, also. I know the details of his son's scholarship because we both work for the same employer, and my son had the same scholarship. Please talk to a tax advisor if you have any questions about another cadet's other scholarships.

    Stealth_81
     
  10. Lifeisgood

    Lifeisgood Member

    Joined:
    Feb 5, 2009
    Messages:
    53
    Likes Received:
    0
    Thanks Stealth
     

Share This Page