One of the true hallmarks of financial independence from your parents is being able to claim yourself as a tax exemption. Many recent college grads are just now embarking on their own financial adventures, and that includes starting to take an active interest in their taxes.
As a taxpayer, you are allowed to shelter some of your income from being taxed by claiming exemptions for dependents. If you provide your own support, you might be able to claim yourself as an exemption. This can be valuable since the personal exemption amount for 2013 is $3,900.
Before you get too excited about claiming yourself as an exemption, though, you need to make sure you are truly eligible to do so.
Do You Qualify for the Personal Exemption?
First of all, you have to determine who is entitled to claim you as a personal exemption. If you are claimed as a dependent on someone else’s tax form (probably your parents), you can’t claim the personal exemption for yourself.
So, why do your parents get to claim the exemption? The answer is fairly simple: Because they provide much of your support. Here are the indicators that someone else can claim you as a dependent:
- You are under the age of 24 at the end of the tax year.
- You were a full-time student in at least five of the months of the year (so if you graduated spring semester, and it ended in May, that counts).
- You lived at home for at least half the year (keep in mind that being in college, even if you are away from home, actually counts as “living with your parents”).
- You did not provide more than half of the support required for you to live during the year.
Chances are that if you are a fresh 2013 college graduate, you can’t claim yourself as an exemption until tax year 2014.
However, if you are older than 24, or if you have been providing most of your own support, you can claim yourself as an exemption. If you are younger than 24 and married, and providing your own support (or if your spouse is providing the support for the family), this is a situation in which you can claim your exemption, even though you might be a full-time student.
It’s important to work all of this out and discuss it with your parents, though. Since your parents will no longer be able to claim you as a dependent if you choose to claim your own exemption, you need to let them know so that they don’t claim you on their own tax forms. This is important since two different tax returns claiming the same dependent can cause problems. You might not get a refund if your parents have already claimed you. Additionally, your tax return or your parents’ return might be flagged for an audit if failure to communicate results in double claims.
As always, if you have questions about your eligibility, consider speaking with a tax professional who can help you figure out whether or not you qualify to claim your own exemption, and make sure you communicate with your parents.