Using a childs funds for college costs to claim a personal exemption.

The child’s eligibility to claim the personal exemption ties to the source from which the student receives over 50% of support (i.e., parents funds versus child’s funds). The strategy of using the child’s accumulated funds for college costs will cause the dependency exemption to shift out of the parents tax return (where it may not be utilized due to the high income phase-out) to the child’s tax return. Furthermore, funds from Qualified Tuition Plans that are used to pay for a child’s education expenses count as support provided by the child, not the parents.