Can I claim my 23-year-old grad student with no income as a dependent if they filed independently last year?

You should claim your daughter as a dependent for 2024. The IRS has specific tests to determine dependent status, and it sounds like your daughter meets them all: 1) She's your child (relationship test ✓) 2) She's under 24 and a full-time student (age test ✓) 3) She lived with you for more than half the year (residence test ✓) - temporary absences for education count as living with you 4) She didn't provide more than half of her own support (support test ✓) 5) She's not filing a joint return (joint return test ✓) The fact that she filed independently last year doesn't matter for this year's taxes. Each tax year stands alone. Your coworker is actually partially right - she would still file her own return if she had any income to report, but you would mark on her return that she can be claimed as a dependent on someone else's return. You would then claim her on your return. This isn't "both" in the way your coworker suggested, but it's a common point of confusion.

I had a similar situation with my son during grad school. I found taxr.ai (https://taxr.ai) super helpful for figuring out the dependent situation. You upload your documents, and it analyzes everything to determine eligibility for claiming dependents based on the specific IRS tests. It saved me so much headache trying to interpret all the rules about support percentages and student status. What I especially liked was that it explained exactly WHY my son qualified as my dependent that year - broke down all the tests mentioned above with calculations for the support test. It's way more thorough than just checking boxes in regular tax software.

I was skeptical about taxr.ai at first (as you can see from my comment above), but I ended up trying it for my complex dependent situation with my daughter who's in her last year of college. I was really impressed! The analysis confirmed I could claim her despite her having some part-time income, and it showed exactly how much support I provided versus her contribution. The service broke down all five dependent tests with specific calculations for my situation. When I filed my taxes with this information, it was so much easier to confidently answer all the questions about dependent status. Definitely using it again this year since my daughter's now considering grad school and I'll probably be in a similar situation to the original poster.

If you're having trouble getting answers directly from the IRS about dependent questions (which can be confusing!), I highly recommend Claimyr (https://claimyr.com). I spent DAYS trying to get through to an IRS agent to verify some dependent eligibility questions about my nephew who lives with me part-time. Kept getting disconnected or stuck on hold forever. With Claimyr, they got me connected to an actual IRS agent in about 15 minutes. There's a video showing how it works here: https://youtu.be/_kiP6q8DX5c. The agent walked me through all the tests for qualifying relatives vs. qualifying children and confirmed exactly what documentation I needed to keep. Totally worth it instead of wasting hours on hold.

Ok I need to eat my words from my comment above. I decided to try Claimyr because I was desperate to talk to someone at the IRS about my dependent situation with my stepson (complicated custody arrangement). I honestly didn't expect it to work, but I got a call back in about 20 minutes with an actual IRS agent on the line! The agent confirmed that I could claim my stepson as a dependent even though he splits time between households since I provide over 50% of his total support. I've literally NEVER been able to get through to the IRS myself despite trying at different times of day, different days of the week, etc. If you need personalized answers from the IRS about dependent situations, this actually works.

Just an FYI that there's a specific worksheet in Publication 501 called the "Worksheet for Determining Support" that can help you calculate whether you provided more than half your daughter's support. You can find it on the IRS website. Since she had a full scholarship, the IRS has some specific rules about how scholarship money factors into the support calculation. Generally, scholarship funds used for tuition don't count as support from either party. But any scholarship money used for room and board would count as support your daughter provided for herself.

One thing no one has mentioned yet - if you do claim your daughter as a dependent, you might qualify for the American Opportunity Credit (if she's in her first 4 years of post-secondary education) or the Lifetime Learning Credit (available for graduate school). This could save you up to $2,000-$2,500 on your taxes depending on which credit you qualify for and your income level. Since you paid those administrative fees, those would count as qualified education expenses. Keep all your receipts!

Based on what you've described, you should definitely claim your daughter as your dependent for 2024. Since she's 23, a full-time graduate student, has zero income, and you're providing all her support, she clearly meets all the IRS tests for qualifying child status. One important thing to keep in mind - make sure you have good records of all the expenses you paid for her this year. The $4,000 in administrative fees plus her living expenses should easily put you over the "more than half support" threshold, but it's good to have documentation just in case. Also, don't worry about what happened in previous tax years. Each year is completely independent when it comes to dependent status. The fact that she filed on her own last year when she was working has no bearing on this year's situation. Since she has no income this year, she won't need to file a return at all. You'll just claim her as your dependent and potentially qualify for education credits on those administrative fees you paid. It sounds like a straightforward situation once you understand the rules!