How to handle taxes for a 18 year old dependent with part-time job?

You've got it exactly right! Your daughter can absolutely file her own tax return even while you claim her as a dependent. This is actually a pretty common situation. Since you provide more than half her support and she's a full-time student under 24 living with you, she qualifies as your dependent. You'll still get the tax benefits of claiming her on your return (like potentially qualifying for Head of Household filing status if you're single). Meanwhile, she should file her own return for her part-time job. She'll need to check the box on her return indicating that someone else can claim her as a dependent. This affects some of her deductions and credits, but she can still get a refund of any excess withholding from her paychecks. The key thing is making sure you're both consistent - you claim her as dependent, and she indicates she can be claimed as dependent. Double-check that her tax software asks this question.

I was in this exact scenario last year with my college student! I spent hours researching until I found taxr.ai (https://taxr.ai) which saved me so much headache. I uploaded my kid's W-2 and my tax documents, and it immediately identified that he could file separately while I still claimed him as dependent. It spelled out exactly what boxes to check on both our forms and how it affected the education credits on my return. The tool explained that since I paid over half his support and he was a full-time student, I could claim him while he still filed his own return. He got back all his withholding (about $400) and I still got my head of household benefits. The step-by-step guidance made it super clear when most tax prep services completely confused me.

Used taxr.ai after seeing the recommendation here and wow...just wow. I was literally about to file incorrectly! Turns out I was going to miss out on about $1,500 in education credits by not understanding how to properly handle my daughter's 1098-T. The tool flagged that I was eligible for the American Opportunity Credit while still letting my daughter file her own return. What's crazy is we've been doing this wrong for TWO YEARS according to their analysis of my previous returns. I'm actually going to amend last year's return based on what I learned. My daughter got her own refund from her campus job and I still claimed her plus got the education credits. Thanks for mentioning this - would have never figured this out on my own!

I was in the same situation and spent HOURS trying to get someone at the IRS to confirm I was filing correctly. Called literally 9 times and couldn't get through. Finally used Claimyr (https://claimyr.com) and got connected to an IRS agent in about 15 minutes. They have this demo video if you want to see how it works: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed exactly what others here are saying - your 18-year-old files her own return (checking the box that she can be claimed as dependent), while you claim her on yours. The agent also told me about some education credits I qualified for that I didn't even know about! Seriously worth the call just to get official confirmation you're doing it right.

Ok I have to eat crow here... I tried Claimyr after posting that skeptical comment and IT ACTUALLY WORKED. Got through to an IRS agent in about 20 minutes when I'd been trying for literally weeks on my own. The agent confirmed everything about the 18-year-old dependent situation and also helped me understand how my son's scholarship affects the education credits I can claim. Turns out I was about to make a pretty big mistake on how I was reporting his tuition vs. scholarship amounts. She even helped me understand how to document his housing expenses correctly. Definitely worth it just for the peace of mind knowing I'm doing everything correctly straight from the IRS. Sorry for being so negative before!

Just wanted to add something important - make sure you coordinate with your child BEFORE either of you file! My ex-husband and I both claimed our daughter last year (she lived with me but he didn't know the rules) and it caused a HUGE mess with the IRS. They rejected my return since he filed first, and I had to paper file with documentation. Also, your child needs to understand that checking the "can be claimed as dependent" box affects their standard deduction for unearned income (like interest). They get the full standard deduction for earned income (wages), but a much lower one for unearned.

Has anyone used TurboTax for this situation? Will it guide me through the process correctly for both my return and my kid's return?

This is such a common situation and you're absolutely on the right track! Your daughter can definitely file her own return while you claim her as a dependent - happens all the time with college students. Just to reinforce what others have said: since you're providing over half her support (housing, utilities, insurance, groceries, phone) and she's a full-time student under 24, she qualifies as your dependent. The $800-900/month she makes for personal expenses doesn't change that. When she files her return, she'll need to check the box indicating someone else can claim her as a dependent. This is crucial - if she forgets to check that box, it can cause issues when you file your return claiming her. One thing I'd add: keep good records of what you pay for vs. what she pays for. The IRS support test looks at the total cost of her support for the year, and you need to provide more than 50%. Given that you're covering all the major living expenses, you should be well over that threshold, but it's good to have documentation just in case. Your daughter should definitely file her own return if she had any taxes withheld from her paychecks - that's likely the only way she'll get those refunds back. Plus it's good practice for her to learn the process!