It’s time to consider how to file your taxes right when stepping into your first year of college. You would also need to know whether or not educational expenses are tax deductible. Because we know that navigating the tax system while balancing your school load, a job, and student loans is no doubt difficult. Many institutions provide an office or student center with specialists who can assist you with your taxes. Use it if you have access to it since once you’re out of school, these programs might cost hundreds of dollars. Working with a tax expert at your school or anywhere else can help guarantee that you get the most out of any tax deductions and credits you might be eligible for. Otherwise, here is a guide to help you learn how to file taxes as a college student.
Do You Need to File Taxes as a College Student?
It is very easy to know if you are eligible to file taxes. That said, answer the following questions to learn whether you can file taxes or not.
How much money did you make last year?
Whether you are a student or not, you will need to file taxes if you make a certain amount of money. To learn about your income, you need to know two things:
- Earned Income: This is the amount that you earn from your job or any scholarship that you have earned.
- Gross Income: Gross income is the amount you earn from your job in addition to any payments that you get such as dividends on your investments.
Moreover, you can learn more about it through IRS or internal revenue service.
Are you married or single?
If you are married, there are two ways to file your taxes. You can either choose to file taxes separately or jointly. In either case, there is a varying income threshold. For instance, if a couple has at least $25,000 in income, can file together. On the other hand, if you make at least $5, you can choose to file taxes separately.
Do you support anyone else in your family?
For instance, let’s say you are under 65 and supporting another family member, you will have to file taxes if you are making around $18,800.
Can you be claimed someone’s dependent?
You will have to file taxes under the following circumstances if you are single and dependent.
- Your income is more than $12,550.
- And your gross income is more than $1,100.
If you have worked the past year, did your employer deduct tax from your payable amount?
In case your employer has withheld some amount from your check, you can apply for some money back. Besides, as a full-time student, you can also apply for a tax credit. You can further learn about it in the following paragraphs.
What do You Need to Have to Start Filing Your Taxes?
Now that you know whether or not you need to file taxes as a college student, you may be considering what you need to have to start filing your taxes. So, here are a few things that you need to have to start filing your taxes.
- Government-issued ID card or driver’s license
- Your social security number
- A W-2 statement from your employers
- The federal tax return from the past year.
How to File Taxes as College Student
As a college student, it can be hard to file your taxes. With all the technicalities and types of forms, filing your taxes by yourself is no doubt a beast on top of all of your academic and personal responsibilities. After all, going to college is the first step of you putting your feet to adulthood. So, you need to learn how to file taxes as a college student to make sure that play your part as a responsible citizen.
Step 1: Learn about Your Dependency Status
The first step of learning how to file taxes as a college student is to learn about your dependency status. Even if the college provides a chance to practice your adult independence, you could still be a “dependent” when it comes to paying your taxes.
Therefore, you need to determine your dependence status. To do so, you must speak with your guardians or parents. Because you can not make your own tax deductions or credits if you are a student and your parents are claiming you as a dependant.
However, there can be benefits to continuing to be a dependant as long as you can while attending college. Besides, parents receive more tax benefits than students. This is beneficial for the family as a whole.
To avail of these benefits, dependent students might choose to have their parents submit an application on their behalf. The IRS or the Internal Revenue Service states that your parents can claim you as a dependant until you become 19. But if you start college, they can continue to do so until you turn 24.
If this is the case, you can still file taxes, but you must state on your tax return that another person, such as your guardian, may claim you as a dependant. Additionally, you are not permitted to use any credits or deductions that your parents have previously argued on their tax returns.
Step 2: Compile Your Tax Documents and Forms
You’ll get a number of tax paperwork and return-filing forms at the start of the new year and prior to the April 18 tax filing deadline. These documents may be obtained from your college, your employment from the previous year, your student loan provider, or any financial institution where you hold a retirement account, if you have one.
It’s crucial to hold off on filing your taxes until you have received all of this paperwork. Because you might need to make adjustments to your taxes later if you file too early.
If you get the document at your home instead of your school address, ask your parents to keep an eye out for it. Besides, you can make a list of everyone who would provide you with a document if at all feasible.
To ensure that you get the forms at the right location, check your address with these organizations Also make sure to provide the correct spelling and apartment number. Moreover, you can also access these forms and documents.
Types of Tax Forms and Documents
W-2: Your employer will provide you with a W-2 form, on which you may find any taxes that were deducted from your income. If you do one, get in touch with your employer to verify the address.
Form 1099: A 1099 tax form serves as proof that you received money from a source other than your employment. For instance, you performed any contract or freelancing work in order to make money. But you were not an official employee.
So, whoever paid you should provide you with this document.
Form 1098-T: This is your tuition statement. And it should be provided by your college. It will contain the data you must provide in order to claim educational credits. For instance, the tuition you paid for, other related expenses, any grants or scholarships you earned, and any modifications from the previous year.
If you have not already received this form, make sure to contact your school.
Form 8863: To determine your eligibility for education credits, such as the American Opportunity Credit and the Lifetime Learning Credit, you’ll need Form 8863.
Form 1098-E: To be able to write off the interest you paid on a qualifying student loan during the tax year, you must have this. Your lender should send you this document if you paid interest totaling more than $600. Moreover, an example of this form and instructions for claiming this deduction is available on IRS.gov.
Step 3: Claim Credit Cards
The third step of learning how to file taxes as a student is to learn how to claim your credit cards. There are two different credit cards that you need to know.
American Opportunity Credit
If you are an undergraduate who has not finished the first four years of post-secondary study as of the start of the year, you are eligible to claim the American Opportunity Tax Credit. But you must be enrolled in a program leading to a degree or certificate at an accredited post-secondary educational institution.
Besides that, you must be working at least half-time for at least one of your academic terms, according to IRS.gov. However, if you have ever received a felony drug conviction, you are ineligible.
Moreover, you get the American Opportunity credit instead of a hope certificate. But to qualify, you will need course materials such as books and other supplies. It also extends the credit’s validity from two to four years.
The cost of tuition, fees, and course materials paid for each student during the tax year would be credited up to $2,500 annually. According to IRS.gov, the credit is 40% refundable up to $1,000. So, even if you do not owe taxes, you’d still receive money.
If your modified adjusted gross income is $80,000 or less, or $160,000 or less, you are qualified to apply for this credit. But this is only possible if you are filing taxes jointly.
Lifetime Learning Credit
With the Lifetime Learning Credit, you can deduct up to $2,000 from eligible education costs. This is not refundable, unlike the American Opportunity Credit. Although you won’t receive your money back, it may lower the amount you owe.
The Lifetime Learning Credit, in contrast to American Opportunity, is valid for higher education and any courses to develop or enhance employment skills. Moreover, a felony drug conviction does not disqualify you, either.
If you’ve paid for qualifying education costs and are regarded as an eligible student, you may be entitled to this credit. Besides, if your MAGI (modified adjusted gross income) falls between $59,000 and $69,000 if you’re single or between $118,000 and $138,000 otherwise, your Lifetime Learning Credit amount is steadily lowered and finally phased out.
Moreover, if your MAGI is $69,000 when filing separately or $138,000 otherwise, you are ineligible to apply for this benefit.
Furthermore, you can not claim the American Opportunity credit and the Lifetime Learning credit together. Additionally, you cannot subtract your tuition and fees while also claiming one of them.
Step 4: Claim Your Education Tax Deduction
Tax deductions for college expenses have ended. You may wipe off up to $4,000 of eligible educational expenses, including tuition and other eligible fees, prior to 2017. Sadly, the tuition fee deduction is not available after 2017.
However, you may still take advantage of the above tax credits. Then, wipe off your student loan interest when you settle your debt after graduation.
How to Deduct Student Loan Interest?
You can deduct up to $2,000 in interest student loans. A loan you took out only to pay educational expenditures can qualify for this deduction. But to qualify for it, you must:
- have paid the interest on your student loan in the year 2020.
- be single and file separately.
- your MAGI is less than $90,000.
Step 5: File Your Taxes
Lastly, the last step of learning how to file taxes as a student this to file your taxes. Furthermore, there are two things that you should consider.
Your Tax and Scholarship Grants
There is no doubt that college students should always have a keen eye on scholarships and grants. Let us consider that you have won a scholarship, how would you now file your taxes? Well, it is easy, and here is how you can do so.
The first thing you need to know is that your scholarship grants are tax-free. However, if you pay for anything other than your tuition fee, books, and other supplies, you will need to claim that portion of the grant as your income.
For instance, you win a scholarship worth $2,000. You use $1,000 to pay for your tuition and books. And use the rest to pay for your rent. In such a case, you will have to claim the remaining $1,000 as a part of your income. Then, file your taxes.
Your Tax and Income
To know whether or not you should file taxes based on your income, you can use the IRS questionnaire. Besides, if you have been working past year, you should file form 1040. Moreover, if you have worked as part of work and study on your college campus, you will get a W-2 which you can file on your taxes.
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