What College Students Need To Know About Filing Their Taxes
If you're in college, you might not think much about paying taxes. After all, you might not be working at all, or if you are working, you might feel like you aren't making enough to merit any stress during tax time. However, it's still a good idea to pay attention to filing correctly during your years in college if you want to enjoy some unique benefits.
1. You can claim money you spent on tuition.
Your college will issue you a tax form showing all the money you've had to pay for tuition. This form allows you to file for some education tax credits, including the American Opportunity Tax Credit, which gives you up to $2500 a year back with your tax return just because you're in your first four years of college. Another education benefit is the Hope Scholarship tax credit, which also provides $2500 a year in returns if you have low income and are in your first four years of higher education.
2. International students also need to file.
If you're an international student on a visa, you must file taxes, or you risk losing your visa. Even if you did not work, you can still submit the education forms and receive some credit. Especially if you are authorized to work part time as a student while studying in the United States, it's essential to file a basic tax form in addition to any tax forms you might need to submit for your home country. Keep in mind that if you do not file taxes properly as an international student, you cannot later apply to begin a legal resident or American citizen. If you are daunted by the task of filing foreign taxes, a tax preparation company like The Callen Accounting Group, PLLC can help you.
3. You can deduct other education expenses.
If you have a student loan that accrues interest while you are in college, you can deduct any money that you pay on student loan interest. It's important to keep your statements and tax forms from lenders for this reason. Grad and PhD students can especially benefit from this, because many of these students are working jobs that pay well enough to put them in a higher tax bracket. Deductions can lower your tax bracket, which helps you to owe less taxes or to get money back on your return.
4. You don't have to pay to file.
Many colleges offer free tax preparation software or a tax workshop for students to quickly come in and file. Since students usually don't have a 401k, a house, investments, and assets, the simple 1040 form is usually all you'll need to worry about. If you do the simple forms yourself, filing is free. If you do have more complex finances than a typical college student, however, you'll want to hire a professional to make sure you don't miss any deductions.
5. Your parents might claim you as a dependent.
If your parents are paying for your living expenses and tuition, they can claim you as a dependent on their own tax returns. This means that you won't be able to "double up" on tax credits. Either you will get the credits and deductions, or your parents will. Before you file your forms, make sure you know whether your parents are claiming you as a dependent or not. You will still need to file your taxes, but you won't have to worry about filling out paperwork for credits and deductions if your parents are claiming you.
6. Find out whether your scholarships are tax-free.
If your tuition is paid for by scholarships, this is not "income" on your taxes. However, if you use scholarships to pay rent, food, and utilities, these are income. If you have substantial scholarship aid, you'll need the help of a tax professional to help keep your payments as low as possible.