TAX filing with dependent income?

My daughter is 20 years old and full time student and living with us.
She is working part time at school and earned $ 1,200 and paid $ 35 federal tax in 2012.
And she got the w-2 for year 2012.
Can I claim her as dependent and do I have to include her income to my tax filing?
If her income will be around $ 7,000 next year then she’d better file her own tax?

Thanks

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