Look through threads here - you will see varying opinions about whether or not you can claim a cadet on your taxes. The academies will tell you not to. Their caveat is, "However, it is informative only and should not be considered as necessarily reflecting the official position of the Internal Revenue Service (IRS)." I think they are taking a conservative approach that does not take into account the precise verbiage of the tax code. I plan on claiming mine every year they are there (except the last). If you need more info check with a tax professional. Here is the verbiage from IRS Pub 17,
Tests To Be a Qualifying Child
1) The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them.
2) The child must be (a) under age 19 at the end of the year and younger than you (or your spouse, if filing jointly), (b) under age 24 at the end of the year, a student, and younger than you (or your spouse, if filing jointly), or (c) any age if permanently and totally disabled.
3) The child must have lived with you for more than half of the year.
4) The child must not have provided more than half of his or her own support for the year.
5) The child must not be filing a joint return for the year (unless that return is filed only to get a refund of income tax withheld or estimated tax paid).
If the child meets the rules to be a qualifying child of more than one person, only one person can actually treat the child as a qualifying child. See
Qualifying Child of More Than One Person , later, to find out which person is the person entitled to claim the child as a qualifying child.
#2 In IRS Pub 17 a Student is defined as, "To qualify as a student, your child must be, during some part of each of any 5 calendar months of the year: A full-time student at a school that has a regular teaching staff, course of study, and a regularly enrolled student body at the school." Cadets graduate with a Bachelor of Science degree - I do not think there is any argument that cadets are also qualified students in addition to being cadets by this IRS definition of student.
The biggest points of contention seem to be #3 and 4.
Below is the verbiage from the footnote for #3 IRS Pub 17
There are exceptions for
temporary absences,
children who were born or died during the year,
children of divorced or separated parents (or parents who live apart), and
kidnapped children.
And here is how the IRS defines temporary absences
.
"Your child is considered to have lived with you during periods of time when one of you, or both, are temporarily absent due to special circumstances such as:
Illness, Education, Business, Vacation, Military service, or Detention in a juvenile facility." Here I believe the authorized temporary absence is both education and military service.
About #4. The issue is whether or not the child provides more than half of their own support for the year. Cadets do not pay for food, lodging, utilities, tuition, facility use, on-base transportation, medical, etc out of the pay they receive from the Air Force. I believe their earned income, the pay they receive, is the support provided by them - and that this is the value that is required in Worksheet 3-1. Worksheet 3-1 does mention nontaxable income but I do not believe that support provided by USAFA counts as nontaxable income (this could be the critical piece of info that I can't find a reference for). I could not find anything in IRS Pub 525, Taxable and Nontaxable Income. The military provides a lot of support that never makes it way onto a tax return; however, I could not find anything in IRS Pub 3 either. I know the support provided by the Air Force to cadets does not count as taxable income or it would be included in box 1 on the W-2. Additionally, IRS Pub 970 states, "Payment to Service Academy Cadets - An appointment to a United States military academy isn't a scholarship or fellowship grant. Payment you receive as a cadet or midshipman at an armed services academy is pay for personal services and will be reported to you on Form W-2, box 1. Include this pay in your income in the year you receive it." It does not address support provided by the service here either.
IRS Pub 17 does not say that the support for the qualifying child test must be provided by the parent like it does for the qualifying relative test that states, "You must provide more than half of the person's total support for the year." I think this is the critical point that the service academies are too conservative in grouping the calculated support provided by the Air Force as unearned income the earned income provided by the cadet.
The verbiage provided by USAFA, "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." may not be completely accurate - I would say they are supported by 3 parties - family, Air Force, and themselves. The IRS has clearly spelled out that "Military service" is an acceptable temporary absence for a dependent who is a qualifying child. Additionally, the IRS verbiage states that the child must not have provided more than half of their own support for the year - not that the Air Force or other Federal entity provides more than half of their support for the year. This is my interpretation for what I plan to do right now. I would sincerely welcome any fact based referenced discussions that support or dispute my understanding of the IRS rules. This is a recurring thread and it would be nice to get it resolved once and for all.