Tax info

Are cadets at USAFA considered active duty for federal income tax?

  • Yes

    Votes: 20 90.9%
  • No

    Votes: 2 9.1%

  • Total voters
    22

Capri120

Parent
Joined
Feb 10, 2016
Messages
1,241
Detailed information about this will be in the "Instruction to Appointees" for USAFA.

Even though they are only active duty for 6 months their first year, according to USAFA, their income plus what the Academy contributes for their education and support exceeds $40K. So, for parents, unless you can legitimately claim you spent more than this on your cadet that year, you can no longer claim them as a dependent and they must file federal (and possibly state) taxes and claim themselves.

Just like others with a job or on active duty, they will receive a W-2.

Best advise -- ask a CPA.
 

Blackbird

Parent
10-Year Member
Joined
Apr 13, 2010
Messages
930
As active duty cadets can get TurboTax (Federal and State) for free.
 

AHS74

5-Year Member
Joined
Dec 22, 2010
Messages
111
C4C year is definitely the only year you could possibly claim them.
 

brovol

5-Year Member
Joined
May 26, 2015
Messages
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If you answer the questions on the IRS site addressing "who can I claim as a dependent", the two most controlling answers are whether the child lived with you for at least half the year, and whether he/she contributed more than half of his/her own support for 2016. The IRS further notes that: A person is considered to have lived with you during periods of time when one or both of you are temporarily absent due to special circumstances such as: Illness, Education, Vacation, or Military service. At least in the first "Plebe" year at a service academy, it seems to me that if the kid has spent more than half of his nights in mom and dad's home, and mom and dad paid for all of the support prior to sending him/her off to the academy, mom and dad (assuming filing jointly) should be able to claim the kid as a dependent. I guess the contrary argument could be whether the kid is paying for more than half of his/her support. To me the value of what the kid is receiving in terms of educational and room and board cost from the academy is not dispositive at all. The question, according to the IRS, is whether the claimed dependent is contributing more than half; not whether someone else is. I suppose that an argument could be made that because the child has earned the cost of education, room and board, that it is the child who is paying for the same. In my assessment though, a better (and admittedly more self serving) analysis is that the child is attending a school which does not charge its students for the cost of the education, room and board, and that the child does make a contribution, but the contribution is limited to the amount which is withdrawn from his/her salary, and applied to uniforms, computers....

Although some of you know that I am a lawyer (a judge), I qualify my comments by admitting that I am in no way a tax guy, and am just trying to figure this out like the rest of you. To provide perspective, my mother, who has only a catholic school HS diploma, and is 85 years old, is who I usually call with my general tax questions. I use Turbo Tax because I'm not knowledgeable to do it without the software. LOL. So just sharing thoughts and conclusions here, and take it only for what it is worth.
 

parentalunit2

10-Year Member
Joined
Apr 18, 2010
Messages
536
Does USAFA not send a letter stating how much the AF provided in support of the cadet? I know that USMA does, and for 2016 the figure is over $40,000. About the only instance where I have ever seen a cadet/mid parent be able to claim their kid as a dependent during the year they started the academy is if they attended boarding school before that. And even then, the numbers might come pretty close but not beat out the military support. It has nothing to do with the number of nights spent at home, but who provided more $$$ for them. In nearly every case, the military wins, and you no longer have a dependent!
 

kinnem

Moderator
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Joined
Oct 21, 2010
Messages
14,031
If you answer the questions on the IRS site addressing "who can I claim as a dependent", the two most controlling answers are whether the child lived with you for at least half the year, and whether he/she contributed more than half of his/her own support for 2016. The IRS further notes that: A person is considered to have lived with you during periods of time when one or both of you are temporarily absent due to special circumstances such as: Illness, Education, Vacation, or Military service. At least in the first "Plebe" year at a service academy, it seems to me that if the kid has spent more than half of his nights in mom and dad's home, and mom and dad paid for all of the support prior to sending him/her off to the academy, mom and dad (assuming filing jointly) should be able to claim the kid as a dependent. I guess the contrary argument could be whether the kid is paying for more than half of his/her support. To me the value of what the kid is receiving in terms of educational and room and board cost from the academy is not dispositive at all. The question, according to the IRS, is whether the claimed dependent is contributing more than half; not whether someone else is. I suppose that an argument could be made that because the child has earned the cost of education, room and board, that it is the child who is paying for the same. In my assessment though, a better (and admittedly more self serving) analysis is that the child is attending a school which does not charge its students for the cost of the education, room and board, and that the child does make a contribution, but the contribution is limited to the amount which is withdrawn from his/her salary, and applied to uniforms, computers....

Although some of you know that I am a lawyer (a judge), I qualify my comments by admitting that I am in no way a tax guy, and am just trying to figure this out like the rest of you. To provide perspective, my mother, who has only a catholic school HS diploma, and is 85 years old, is who I usually call with my general tax questions. I use Turbo Tax because I'm not knowledgeable to do it without the software. LOL. So just sharing thoughts and conclusions here, and take it only for what it is worth.
LOL! Let me know how that works out at your audit! Also, using your logic you would need to include the cost of the room and board as income. As parentalunit2 said, the IRS is all about $$$$$.
 

Capri120

Parent
Joined
Feb 10, 2016
Messages
1,241
Does USAFA not send a letter stating how much the AF provided in support of the cadet? I know that USMA does, and for 2016 the figure is over $40,000. About the only instance where I have ever seen a cadet/mid parent be able to claim their kid as a dependent during the year they started the academy is if they attended boarding school before that. And even then, the numbers might come pretty close but not beat out the military support. It has nothing to do with the number of nights spent at home, but who provided more $$$ for them. In nearly every case, the military wins, and you no longer have a dependent!

USAFA does not send a letter, per se, instead, there are two pages in the "Instructions to Appointees" that discuss taxes. Last year the figure was about $44,000/year. So, even though the cadet may have been at home for 6 months, most of us would be really hard-pressed to say we contributed $22,000 worth of support to our son/daughter for 2016.

We didn't even try to do the math, even though we had college expenses for our DD. We decided that it was time she claimed herself, which allowed her to get a complete refund from federal and state for 2016 and really didn't cost us much other than the extra exemption.
 

fencersmother

10-Year Member
Founding Member
Joined
Oct 10, 2007
Messages
3,203
LOL! Let me know how that works out at your audit!

+ infinity

This was the best quote of the week.

Simple answer: if your child lived under your roof after June 30, USUALLY you can claim him. Since BCT starts in June, USUALLY you're out of luck.
 

Capri120

Parent
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Feb 10, 2016
Messages
1,241

brovol

5-Year Member
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May 26, 2015
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Got the information I cited from the IRS. Not sure which part is being disagreed with. The IRS literally has a tool which allows you to input the pertinent info. I understand what the conventional wisdom is here, and would love it if someone could post the IRS rule which makes the amount that an academy says is spent on the cadet relevant.

These rule change, and it appears that this may be one which has. This is what Turbo Tax says about similar situation for the 2016 tax year. I understand there are distinctions with the academy scenario, but the comments are interesting:

Q. My daughter won a full-ride scholarship to an expensive college. I’m thrilled, but I think the value of the tuition is more than what it costs me to feed and clothe the young scholar. If I don’t provide more than half of support, do I lose her as a dependent?

A. Don’t worry. First, scholarships are specifically excluded when figuring support. And remember, the test for a qualifying child is no longer that you provide more than half the support, but that she does not provide more than half of her own support. You can still claim her, assuming she’s under age 24.

Tax laws change yearly, and it does look like some of the rules and language regarding the definition of a child dependent have changed. It seems that most of the authority cited in this thread comes from the way it has been, rather than a review of the thresholds for the tax year 2016. Honestly, I dont know the answer, but I think there is enough to look closer. I dont want to lose an audit, or even get one, any more than anyone else, and I am the type to play it safe. But may present the question to a CPA.
 

Capri120

Parent
Joined
Feb 10, 2016
Messages
1,241
The key to your comments/questions above is "scholarship". According to the Academies, the IRS does not consider the money invested in/spent on the cadets as scholarships.

The Academies reference IRS pub 17, but I looked through it and really couldn't find anything that specific to the cadets' situation.

A CPA with more expensive software would hopefully be able to pinpoint the rule, pub, etc. from the IRS.
 

brovol

5-Year Member
Joined
May 26, 2015
Messages
1,622
The key to your comments/questions above is "scholarship". According to the Academies, the IRS does not consider the money invested in/spent on the cadets as scholarships.

The Academies reference IRS pub 17, but I looked through it and really couldn't find anything that specific to the cadets' situation.

A CPA with more expensive software would hopefully be able to pinpoint the rule, pub, etc. from the IRS.
I think the key is, rather, whether it is the claimed dependent (the cadet), or someone else (the federal government) which is providing the support. It seems that the academies have for years been claiming that they have been providing it. If that is the case, then the dependent is not providing it.

There is also the question of whether the child has lived with the parents for more that half the year. This would be a close call either way, as R-day (in my case my son is at West Point) was on June 27 I think, which if nothing else counted then that would be days less than half the year. However, he has been home several times since then, and those overnights would put it over the hump. In my line of work we come across this question in split custody cases where both parents want to claim a child, and the IRS uses total overnights as the governing threshold, unless the court orders otherwise. I am not sure if that would be the same standard for our question, but my instincts lead me to believe the IRS would be consistent.
 

parentalunit2

10-Year Member
Joined
Apr 18, 2010
Messages
536
Interpret tax code however you'd like and hope it could stand up to an audit. When you get right down to it, the entire tax system is one giant honor system anyway!
Just ensure that you and your cadet/mid are on the same page and know what the other is doing. If both sets claim them as a deduction (both parent and child), you will both receive letters from the IRS, as only one may be claiming. Someone would have to do an amended return at that point.
 

brovol

5-Year Member
Joined
May 26, 2015
Messages
1,622
....At first I thought that this may only benefit parents of first year academy students, as the half year rule could only apply to them. But the rule doesn't count time away from home for education or military service. Thus, may apply to all parents.
 

jebdad

5-Year Member
Joined
Aug 19, 2013
Messages
432
Brovol, you may want to ask the CPA what the tax impact difference is whether claimed or not. You may learn it is not even worth your risk. In my case, I remember my CPA saying the difference was negligible due to things limit AMT, number of dependents, etc.
 
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