I just found this on another service academy chat board though:
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.