AOC and Fox News Both Just Gave Terrible Tax AdviceIncome Taxes
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So this week, Representative Alexandria Ocasio-Cortez publicly gave some terrible and erroneous tax advice pertaining to the stimulus payments, and — both hilariously and ironically — the only network that published it was Fox News, and they did so uncritically.
My point here isn’t to crap all over AOC or Fox News but to point out that no matter your political leanings, whether you’re an AOC fan or a Fox News fan — though if you’re both an AOC fan and a Fox New fan, I would question the consistency of your political views — you need to:
- think for yourself and
- look at the actual facts (in this case, the actual text of the CARES Act alongside the Internal Revenue Code).
So please share this with anyone who has a one-track political mind and who looks at some figure or network — be it AOC or Trump or CNN or Fox News or whoever — and takes whatever they say as absolute truth.
Look, I was able to hone in on this mistake — and literally no one else is talking about this — because I’m a tax expert. But the truth is, there’s B.S. everywhere on both sides of the aisle.
Context to AOC’s Statement
I’m going to tell you exactly what AOC said and Fox News published later in this article, but just to give some context to Representative Ocasio-Cortez’s tax advice:
- There’s no question that some people are getting shafted by the stimulus. Consider dependent adults such as disabled adult children still dependent on their parents or elderly parents whose children claim them as dependents. In both of these scenarios, the dependent doesn’t get anything from the stimulus, and the person claiming them doesn’t get anything for them either. And these are frankly people who probably need a little extra more than the average American right now. I know people caring for disabled adult children, and that’s such a burden. And I also know people who are caring for elderly parents, and I know that can feel like a full-time job.
- Another example of people who got “left out” is college students who are claimed as dependents by their parents. Parents can claim their children as dependents on their tax return under the age of 24 if they are a full-time college student at least five months of the year and the parents provide more than half of their support. For stimulus purposes, however, the parents can’t get the $500 for them because they’re aged 17 or older, and the college student can’t get the $1,200 because they’re eligible to be claimed as a dependent. They’re both screwed.
What AOC Said (and Fox News Published)
So Representative Ocasio-Cortez, in a virtual town hall this week, gave a little piece of tax advice for these students and their parents. Here’s what she said:
If you are…17 or older, and you are filed as a dependent on someone else’s tax return, there is no cash assistance, or additional cash assistance, that’s offered to that person, so you do not receive a $1,200 check, and you…are not counted as that additional $500 toward whoever’s counting you as a dependent. So a lot of people are very concerned about this. My personal piece of advice would be that if you have not yet…filed in 2019, talk to the person who is claiming you as a dependent and figure out if…your personal situation would be better if you all filed separately, or if it ends up…still being the best thing to do to file together. So make sure you have that conversation. I don’t believe that it’s too late to file your 2019 return in the way that you see best fit for yourself and your situation. Representative Alexandria Ocasio-Cortez
She’s saying that college students should figure out with their family to look into what tax benefits their parents get if they claim them as a dependent — such as potentially the American Opportunity Tax Credit for qualified education expenses that parents paid on the student’s behalf — and to weigh these parental tax benefits against the $1,200 stimulus payment the student would (supposedly) get if their parents didn’t claim them as a dependent.
Why AOC and Fox News Are Wrong
So why are AOC and the article that Fox News published wrong?
Because it doesn’t matter if mom and dad claim you their eligible college student or not — even if the student is merely eligible to be claimed as a dependent by them, they are not eligible for a $1,200 stimulus payment.
Don’t believe me? I’ll show you in the actual law.
For purposes of this section, the term ‘eligible individual’ means any individual other than…any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual’s taxable year begins.
What does this mean? What is this Section 151? It’s referring to Section 151 of the Internal Revenue Code i.e. the tax code. It’s referring to dependents
Now look closely at the language of the CARES Act (above). Does it say that you’re not eligible if you’re an individual with respect to whom a deduction under section 151 was taken by another taxpayer?
No. It says you’re not eligible if you’re an individual with respect to whom a deduction under section 151 is allowable to another taxpayer.
“Allowable” means whether they actually claim you as a dependent or not.
So college students, if your parents can claim you as a dependent, and you somehow convince them not to, you are still not eligible for the $1,200 stimulus payment, despite what AOC and Fox News told you!
Logan is a practicing CPA, Certified Student Loan Professional, and founder of Money Done Right, which he launched in July 2017. After spending nearly a decade in the corporate world helping big businesses save money, he launched his blog with the goal of helping everyday Americans earn, save, and invest more money. Learn more about Logan.