Tax advise son in college

My wife and I usually file a joint return with my 20-year-old full-time college student (Virginia) as a dependent. He works a very small federal aid job at school, 2 hours a week, and a summer internship in Baltimore where he makes $12k. Home state is NJ.

My question is, should we still include him as a dependent as we pay for most of his expenses, including college, and have him also fill out his own tax return?

If so, should he fill out a federal and Maryland state return only? His home state is New Jersey, but he has no income here, and his Virginia income is under $1,000.

Thank you for any advice.

My question is, should we still include him as a dependent as we pay for most of his expenses, including college, and have him also fill out his own tax return?

Yes, and if he is still your dependent, he should check the box saying he can be claimed as a dependent on his return.

If so, should he fill out a federal and Maryland state return only? His home state is New Jersey, but he has no income here, and his Virginia income is under $1,000.

It sounds like he should file 3 state returns: an NJ resident return, an MD nonresident return, and a VA nonresident return.

Addressing Virginia specifically, he must file because as a nonresident, his total income exceeds the $11,950 threshold, and some of it is Virginia source. See the Filing Threshold in the relevant instructions.

For NJ, he should report all of this income, then claim the other state tax credit for taxes paid to MD and VA.

@Nico
Thank you for the informative response, very much appreciated. Should he do the non-resident forms first, or doesn’t it matter?

My plan was to file my joint return first, then I’ll do his federal, two nonresident state forms, and then the New Jersey state return last. Maybe it doesn’t matter, but I thought I would ask if you know.

@Zahari
Nonresident returns first, yes. You need to take the tax computed on the nonresident returns and input them onto the NJ resident return for the other state tax credit.

Once again, thank you very much.

You can still include him as a dependent and have him file his own tax return. Just make sure that he marks the “can be claimed as a dependent” box.

Now for state taxes. Most college students remain residents of their parents’ state during undergrad. This would likely make your son a full-year resident of NJ, even though he has been in VA for college and MD for an internship.

Your son will need to file an NJ full-year resident tax return, where he pays NJ tax on income made in all states.

For VA, he must file a VA nonresident return because his total income exceeds the filing threshold of $11,950, and some of that income is Virginia-sourced.

For MD, he’ll need to file a nonresident tax return. He’ll owe tax to MD on the work done in the state (this was likely withheld from his paychecks). However, whatever tax he pays to MD will act as a credit towards his NJ tax return. For example, if he pays $1,000 to MD and owes $1,200 to NJ, he can use that credit to only owe NJ $200.

@Fane

VA only has a filing requirement for single people who make more than $11,950 in VA income, so your son isn’t required to file in VA. I’m assuming here that your son didn’t have any state income tax withheld when he made under $1k.

No, please read the nonresident instructions more carefully:

Nonresidents of Virginia with income at or above the filing threshold must file if any of their income is from Virginia sources.

If your Virginia Adjusted Gross Income (VAGI) is at or above the threshold amount shown in the following table, you are required to file.

If your income is only from wages, salaries, and interest from a savings or checking account, your VAGI is usually the same as the federal adjusted gross income shown on your federal return. Once you have computed your VAGI, check the chart below to see if you need to file a Virginia income tax return.

You do not have to file if you are:

Single and your VAGI is less than …$11,950

In general, nonresident tax uses a prorated calculation, so you always need to consider income from all states when determining a filing requirement.

@Nico
It was a federal work-study program that’s kept at $1,500 per semester, but due to his credit load, he only works two hours a week for $11 an hour, only while he’s at school.

So just to clarify, he still needs to file a Virginia nonresident, correct?

@Zahari
Yes, he needs to file. If he didn’t have any Virginia tax withheld, he’ll probably owe a small bit of Virginia tax.

@Fane
Thank you.