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Will it help or hurt my adult child's chances at financial aid if I claim her on my taxes?

March 16, 2012: 6:00 AM ET

I am the father of a 22-year old who works part time and attends college part time. I typically claim her as a dependent every other year and her mother (whom I have never married) claims her when I don't. I'd like to know is whether it would be more beneficial for financial aid purposes to claim her as my dependent for 2011 or to allow her to claim herself on her own tax-return?
— Name withheld

Take the tax deduction, "whether or not you do so will not affect your daughter's chances of getting financial aid," says Jerry Love, a certified public accountant in Abilene, Texas.

To qualify for virtually any kind of need-based financial aid, your daughter will be required to fill out the FAFSA (Free Application For Federal Student Aid) form. Under the current rules of the FAFSA, a child under the age of 24 is considered a dependent regardless of whether or not he or she is claimed on a parent's tax return. In either case, the parents must include their financial information on the students' application. (For all the criteria, see fafsa.ed.gov.)

Used to be that financial aid was keyed on whether someone else claims the applicant as a dependent. Someone–even someone making as much money as Warren Buffet's secretary, who's up there in the 35% tax bracket – could have decided to forego the deduction (now $3,700) in order to have their child's income considered separately from the household income, thereby making the child look more "needy." But the obvious flaw caused the government to change the rules. Now, an applicant must fall under certain specific conditions—such as being a graduate student, being married, having a child, or being a veteran — in order to be deemed financially independent.

—Judy Feldman

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