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6 Tax Tips for College Students
Taxes can be an exciting or daunting time, depending on your own situation. If you’re filing taxes for the first time as a college student, you may not be aware of the credits and deductions you could qualify for or other tax tips that can help you file correctly.
We’ve put together a helpful list of tips for college students that can help you file your income tax return correctly and receive the maximum deductions and credits that you may qualify for.
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1. Determine Your Dependency Status Before You Start Your Return
If you’ve never filed a federal income tax return, it’s important that you determine your dependency status before getting started. While you may be an adult, you might also still be considered a dependent on your parent’s or guardian’s tax return.
Having a conversation with your parents or legal guardians can help you determine your dependency status. If you are a dependent and your parents intend to claim you on their federal income tax return, you will not be able to claim any student-based credits and deductions yourself.
However, there are some advantages to remaining as a dependent for as long as you can. For example, tax benefits are generally higher when a parent claims a student as a dependent, opposed to a student claiming themselves.
What determines your dependency status? According to the IRS, a child can be claimed as a dependent until they are 19 years of age, or 24 years of age if the child is a student.
If your parents or legal guardians intend to claim you as a dependent, you must indicate that when filing your own federal income tax return.
2. Learn About the Student Credits You May Qualify For
If you are a student, you could qualify for the American opportunity tax credit (AOTC) or the lifetime learning credit (LLC). Here’s a closer look at those student-based credits.
American Opportunity Tax Credit (AOTC)
The American opportunity tax credit lets undergraduate students or the parents or legal guardians of dependent undergraduate students claim up to $2,500 toward student-based expenses like tuition, books, supplies, and other school-related fees. However, it does not cover expenses you pay toward transportation or housing. If you or your parents qualify, you can claim the first $2,000 of these expenses and 25% of the next $2,000 in expenses.
The AOTC helps reduce the amount of taxes you may pay, but you’ll need to meet income-based requirements to receive the full amount you’re eligible for.
- For the 2021 tax year, your modified adjusted gross income (MAGI) must be $80,000 or less ($160,000 or less for married filing jointly) to receive the full amount you can get.
If your income is between $80,000 and $90,000 ($160,000 to $180,000 if married, filing jointly), you can still qualify for the AOTC, but with a reduction to your credit amount.
If your income is higher than those brackets, you are generally unable to claim the AOTC.
Lifetime Learning Credit
Another credit that students commonly qualify for is the lifetime learning credit (LLC). Like the AOTC, you can claim expenses related to tuition and fees, but not toward transportation or housing. However, this credit allows you to claim 20% of the first $10,000 you pay toward those expenses.
This is another income-based credit.
- For the 2021 tax year, your modified adjusted gross income (MAGI) must be less than $59,000 ($118,000 for married filing jointly) to receive the full amount you can get.
If your income is between $59,000 and $69,000 ($118,000 to $138,000 if married filing jointly), you can still qualify for the LLC, but with a reduction to your credit amount.
If your income is higher than that, you will ot be eligible for the LLC.
Like the AOTC, students or a dependent student’s parent or guardian can claim the credit. However, this credit is not limited to undergrads. Undergrads, graduates, and vocational students can claim the LLC.
There is no limit to the number of years you can claim this credit, but you cannot claim both the LLC and the AOTC within the same year.
3. Get Familiar with Student Deductions
Unfortunately, college tuition is no longer tax-deductible as of 2017. However, you may be able to deduct your interest on a qualifying student loan that you’re currently paying for.
If you have a qualified loan, you can deduct up to $2,500 in interest. However, to qualify for this student deduction, you must meet the following criteria:
- You have paid interest on your qualifying student loan during the tax year
- You must be legally required to pay interest on your student loan
- If you are married, you cannot file separately
- Your MAGI is less than $90,000 if filing as single, or $180,000 if you are married filing jointly
If your MAGI is over $80,000 ($160,000 if married filing jointly), you may still qualify for the deduction, but will receive a reduced amount.
Finally, you must have your 1098-E from your student loan lender. If you do not receive this form, you will need to contact your lender.
4. Know How Scholarships Impact Your Taxes
One common question that students ask is whether their scholarships could impact their taxes. Generally, scholarships, fellowships, and grants are not taxed, so long as you use the entire amount for their intended purpose, like tuition, enrollment fees, books, and supplies.
If you used a portion of your scholarships toward other qualifying expenses, such as housing, you may need to claim that amount as income come tax season.
5. Check to See if Your School Has a Tax Professional
Some campuses have tax professionals that students can use come tax season. It’s always worth checking if your school provides this valuable resource. If they don’t, you may want to consider hiring a tax professional instead of attempting to file your taxes on your own. Taxes can be tricky, and using a professional will help you get the deductions and credits you qualify for.
6. Make Sure You Use the Right Education Tax Forms
If you intend on filing your federal income tax return on your own, make sure that you have the correct education tax forms. Your school generally sends out Form 1098-T, which details the educational expenses you have paid. This form can help you input the correct information when filing your return. Additionally, be sure you receive your form 1098-E if you are currently paying interest on a qualifying student loan. While this should automatically be sent to you by your lender, contact your lender if you do not receive it.