Dependent or not

[Jesse]

My clients son in the National Guards. The client's employer will allow children to stay on their medical policy until the child turns age 26.

--If the child is a dependent the employer paid premiums is not taxable income to the client.

--If the child is not a dependent the employer paid premiums will be included as taxable income to the client.

Employer is telling client that as long as the child is a full time student it does not matter child can be claimed as a dependent.

I told client the support issue needs to be addressed. The son is 21 and a full time student, has not resided with parents for the past 19 months and approx 70% of support is provided by the students monthly National Guard pay, the other 30% from parents. The child is providing more than 50% of their own support, therefore, not a qualifying child or a qualifying relative.

The plan administrator is saying the support is not an issue as long as the child is a full time student because the National Guard money is treated as a scholarship.

I don't think this is true, unless there is some exception for National Guard income. The child goes to training one weekend a month and I believe this to be compensation for services, not a scholarship for living expenses.

Anyone else encounter such a situation?
Any thoughts?

[BP.]

Sorry, Jesse, I have no experience regarding the nature of the NG income treated as scholarship, but some questions on the dependency issues.

Member of household test: You mention student not living with parents. Might this be a temporary absence, perhaps because of living on campus?

Support test: You mention coming 70% from student's NG income & 30% from parents. Does this include tuition, and who pays that? (I wasn't seeng how the NG income could cover a 70% share of that.)

Just some thoughts in case you can meet the dependency tests, and then don't have to depend on plan admin's statements.

Barb

[Jesse]

Thank you for thoughts...

Member of household test: You mention student not living with parents. Might this be a temporary absence, perhaps because of living on campus?

Barb

He doesn't live on campus, he's off campus with a roommate. The intent is not to come back home and after 19 months away already I hesitate to call it a temporary abscense.

Support test: You mention coming 70% from student's NG income & 30% from parents. Does this include tuition, and who pays that? (I wasn't seeng how the NG income could cover a 70% share of that.)
.

Barb

That does not include tuition, from what I understand the tuition is reimbursed separately by the Guards. Student receives $600/month from the Guards in addition to the tuition and also has a small side job he said earns $200+/- month.

I still think no dependency exemption for Mom and Dad, but I just want to make sure there's not something I'm overlooking.