Have a Tax Question? Ask a Tax Expert
Hello and thank you for using Just Answer,As a dependent your daughter cannot claim the education expenses. Your daughter can still itemize her deductions, even if claimed as a dependent. She can claim medical expenses (that are over 7.5% of her Adjusted Gross Income) that she paid for herself. If the money from the bonds was used for this and she is taxed on the bonds then she can use the medical.It may be beneficial to look at itemizing for her if it will be greater than the standard deduction she gets to use.
The standard deduction for an individual who can be claimed as a dependent on another person's tax return is generally limited to the greater of:
The individual's earned income for the year plus $300 (but not more than the regular standard deduction amount, generally $5,800).Alternative Minimum Tax is an additional tax.
SIzeable investments could trigger AMT even at your daughter's age. It is not age that counts but where the income came from and the amount. This simplifies it a bit, I know.
Please be aware that you are rating my courtesy and service as a professional, and not necessarily whether you like the information that you are receiving.
I need some clarification on the AMT. As I understand it, the income earned from the savings bonds are taxable as regular income. Would the AMT cause a greater tax burden than would happen with regular income tax or in addition to regular income tax?
Yes, it could
You may have to pay the AMT if your taxable income for regular tax purposes plus any adjustments and preference items that apply to you are more than the AMT exemption amount.That is straight IRS talk. If you’re using tax software, it will calculate the AMT for you automatically. You’ll notice that if the AMT is lower than the regular tax, you don’t get the taxes lowered. You only get to see the AMT tax if you owe more.