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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
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Experience:  15years with H & R Block. Divisional leader, Instructor
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We are parents of a student and we cosigned a large student

Customer Question

We are parents of a student and we cosigned a large student loans that makes up a substantial part of our college son's support. How do we treat this loan in terms of who gets the credit for these loans in figuring who provides more than 50% of his support? He is the borrower and we both are cosignors.

In our situation, I have figured our expenses in support of our son. If he has to treat the loan as part of his contribution to hiw own support, then he has provided more than 50% of his own support. If we either split the loan 50-50 or we take credit for the loan, then we end up having provided more than 50%.

This decision has a major bearing on whether we can claim him on our taxes in relation to the support test.
Submitted: 4 years ago.
Category: Tax
Expert:  Robin D. replied 4 years ago.

Hello and thank you for using Just Answer,

The gross income test considers the dependent's taxable income. The support test considers all income, taxable and nontaxable.

Total support items include

  • food, clothing, shelter, education, medical and dental care, recreation, and transportation; and
  • welfare, food stamps, and housing provided .

Compare the dollar value of the support provided by the taxpayer with the total support the person received from all sources.

 

In figuring a person's total support, include tax-exempt income, savings, and borrowed amounts used to support that person. Tax-exempt income includes certain social security benefits, welfare benefits, nontaxable life insurance proceeds, Armed Forces family allotments, nontaxable pensions, and tax-exempt interest.

 

Here is an example from the IRS Pub 501

 

Example 2.

Your brother's daughter takes out a student loan of $2,500 and uses it to pay her college tuition. She is personally responsible for the loan. You provide $2,000 toward her total support. You cannot claim an exemption for her because you provide less than half of her support.

 

I sincerely XXXXX XXXXX is helpful,

Customer: replied 4 years ago.

Thanks for the reply. I saw this information before. I believe it is all in Pub 501. As a loan co-signor, I most certainly have some personal reponsibility for the loan. It is on our (wife and I) credit reports, and the legal small print on the note indicates that we can be required to pay the debt (e.g. if the student borrower does not), without going through any drawn out legal process.

 

I am afraid "personally responsible" is too general to help me out.

Customer: replied 4 years ago.
can you be more definitive?

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