Sep 30, 2022 05:40 PM EDT
A Guide to Taxes as a College Student
If you have just entered college, it might be time to start thinking about paying taxes. However, it can sometimes be difficult to navigate the tax codes. You may be lucky if your college has an office that helps the students with taxes. Without that, you will have to pay for the services outside. It is crucial to know what involves filing taxes for college students. Here are crucial steps you should take.
Learning the State of Dependency
Even if you become independent when you get to college, you may still be dependent when it comes to taxes. If you are still dependent on your guardians or parents, you will not be qualified for deductions. However, staying dependent may be a good idea if you want your parents to pay the taxes and claim the deductions and credits. The good thing is that when parents claim the deductions, the benefits are more than what a student gets, making it beneficial for the whole family. You remain dependent until the age of 19 years. However, this period can be extended to 24 years once you get to college. You can still pay taxes, but you will not be able to claim the deductions and credits because your parents or guardian are already doing so.
Knowing the Tax Forms
It is crucial to know the tax forms before the deadline. The deadline for filing tax returns is usually April 18. Therefore, you need to get these forms before them. They might be from your employer, loan lender, or the college. It is crucial to get all the forms before filing to avoid inconsistencies. Some of the forms you will be required to fill include.
Remember, these forms are from different sources. Therefore, understand the kind of information you are required to file.
Scholarships and Taxes
Scholarships and grants are popular things in college. However, do you know if they are taxable or not? Scholarships and grants are non-taxable only if the entire amount goes to tuition, books, supplies, equipment, enrollment fees, and anything related to the course. Using the remainder of the scholarship for other expenses like food or room can be scholarships as taxable income. If you also get a grant, you must report it as taxable income unless you use it for research or federal work programs.
Your Income and Taxes
You may not have to file a tax return if your income is below a certain limit. However, before assuming this, confirm whether or not you will be required to file the tax return. Remember, if you are from another state where you are getting income, you must file tax returns in the two states.
Understanding Education Tax Credits
You can qualify for the American Opportunity Credit if you meet the qualifications set by the IRS. You can claim the credit if you are in an undergraduate program and have not yet completed your four years. However, you must be in a well-recognized post-secondary institution.
You can also get the Lifetime Learning Credit. This credit is not refundable, but it reduces the tax you owe the IRS. It is best if you use it to improve your skills. However, you are only eligible for the credit if you have paid for education expenses and are an eligible student. Remember, you cannot get the credit if you are still dependent.
You cannot deduct the entire interest if you have a student loan. However, any other deduction on the student loan means you have to meet the eligibility criteria. You must be legally obligated to pay the interest and must have paid your loan interest in the past year.
College students need to pay taxes if they are making an income. However, your pay depends on various factors like your dependency and marital status. You must have made a specific amount of income over the year to file the tax return. It is crucial to understand taxes and college students to know how to go about it.
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