For college students setting foot into the adult world, filing taxes can feel like a confusing, looming shadow. Additionally, if you are a working professional already filing taxes annually, and you are going back to school, you may wonder how those expenses might impact your tax filing. No one likes dealing with taxes, and for students, the question of whether they need to file and what can or cannot be deducted can feel overwhelming. We will break down what you need to know as a student, piece by piece.
Determining if You Need to File Taxes as a College Student
The first step is determining whether you must file taxes as a student. The answer to this question will depend upon your answers to a few questions, so let us explore each one.
How much money did you make last year?
First, you need to determine how much money you made. This does not only include the money you made officially working but also any money you received through investments or other types of unearned income.
The thresholds for the IRS are usually about the following.
- If you are single and made more than about $12,550, you will need to file.
- If you have more than $1,100 in unearned income, you will need to file.
- If you made more than $400 in a self-employed venture, then you will need to file.
When you earn money, you will receive a W-2 or 1099 to report your earnings. If you have investment accounts, you might also receive a 1099-INT or 1099-DIV to report income from these investments. Use this information to determine whether you need to file taxes.
Are you married?
Remember that marital status can impact the thresholds that the IRS uses when determining whether you have to file a tax return. You will have a higher threshold as a married couple before you hit the point where you must file taxes.
Did you support other people in your household?
The IRS also looks at whether you supported anyone in your household. For example, some students may have children or support a dependent sibling. If you do have a dependent, then you will need to file taxes as the head of the household. It also changes the threshold at which you have to file. If you supported others, you will need to file a return if you made at least $18,800.
Can you be considered someone else’s dependent?
Consider whether your parents will still claim you as a dependent. Parents can claim children until 19, or if they are full-time students, until 24. However, parents will have to meet some requirements showing the level of financial support they provide. If you do not know whether your parents plan to claim you on their return, you will want to have this discussion before the tax season.
Did you work in a state that collects income tax?
You also want to carefully investigate if you work in a state that collects income tax. If you do, you will need to file a state return as well as your federal return. If you work, live, and go to school in different states, this can make the state aspect more challenging. You may need two part-year returns. Check the rules for your individual state.
If you worked, did your employer withhold taxes from your paycheck?
If you worked, even if you did not reach the income threshold required for tax filing, you want to look carefully at your pay stubs. Note if your employer withheld taxes from your paycheck. If they did, it might be a good idea to file a return even if you did not meet the threshold. It could help you get a refund on some of the funds.
As you start to investigate your personal tax situation, starting early is a good rule of thumb. Taxes can be confusing, and adding the stress and pressure of a looming deadline only makes it worse. Instead, organize your documentation on your income and school fees early so that you can carefully sort all your information and avoid mistakes. You will also have time to ask questions if problems arise.
Know the Deadlines
As you begin to work on your taxes, make sure you know the deadlines as well.
The general income tax deadline is April 15, although this year, it falls on April 18, 2023.
However, if you are self-employed, you must also be mindful of quarterly taxes. The deadlines for these are around:
- April 15
- June 15
- September 15
- January 15
Documents You Will Need:
The documents you need to pay your taxes will vary depending on your sources of income. However, here are some of the most common forms that you may receive. As tax season gets closer and you start to receive important documents with your tax information, make sure you keep track of them carefully, so you will have all your necessary information ready to go.
- Form 1040 – you will likely use this form to file your income tax return.
- Schedule C – if you are self-employed, you will file your returns with this form.
- W-2s and 1099s – these will document your earnings as either an employee or an independent contractor.
- 1098-T – This details the amount of tuition you paid
- 1098-E – This document shows how much you paid in student loan interest payments.
- 1042-S – this form is like 1040 but for international students.
- 8843 – This form is used by international students to document that they made no income.
Student Loans and Taxes
As you gather your information and prepare to pay your taxes, you want to know how the different financial components of your studies impact your taxes as well.
If you are not married and your income is less than $85,000, or if you are married and your income is less than $170,000, then you can deduct up to $2,500 of the amount paid towards student loan interest. Note, however, that if the interest is paid by an employer, then you will not receive the deduction.
Scholarships, Financial Aid, and Taxes
When it comes to scholarships and financial aid, it can be a bit confusing. Essentially, scholarships given for tuition and fees are not counted as part of your income. However, funds awarded or used to pay for your room, board, travel, and similar components of your education are considered taxable. Therefore, track this money as it comes in and what you use it for.
Student Loan Interest Deduction
Students can also access two important education credits to help them pay for their education. Here is what you should know about each of them.
The American Opportunity Credit
It is available for undergraduates and covers tuition, fees, and course materials. It can be claimed for the four years of undergrad. The credit is $2,500.
The Lifetime Learning Credit
This credit offers up to $2,000 for qualified educational expenses. It applies to students from their undergraduate years through graduate school and even professional degree courses. There is no limit to the number of years you can receive this credit.
Tuition and Fee Deductions
Beginning in 2021, the IRS no longer allows students to deduct their tuition and fees. However, students do qualify for credits. Form 8863 can help you find available credits.
Other Deductions and Tax Credits for College Students
Students and their parents should note that you can only take one tax credit or deduction per year, with the chief exception of the student loan interest deduction. Therefore, it is a good idea to look carefully at how you use your deductions and credits to help you maximize your savings.
Ways to File Your Taxes
Students have a few options to help them navigate tax filings. If you make less than $73,000, you can file your taxes for free through the IRS Free File offer. Other popular tax filing programs, like TurboTax, also offer free versions that you can use if you have a straightforward tax return.
If you prefer personalized assistance, you can also go through a professional tax accountant to help you collect all your important financial information. Your school may also offer assistance or guidance for those filing taxes.
Take Your Education Further
If you want to take your education further, then it is time to look at Post. With a wide selection of undergraduate and graduate degrees available, you will find the opportunities you need to take your career to the next level. We also offer a number of online and on-campus degree options, making it even easier for you to start working toward your dreams.
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