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Student Tax Returns

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As a student, you know you’re not exempt from midterms. But what about taxes? You still might need to file a tax return during the month of April if you have a job while in school. We’ll coach you on how to use the best possible method to maximize your student tax returns.

Are You Taxed Differently as a Student?

There are no separate set of filing requirements for students — the primary tax considerations for students are based on your level of income. You may be eligible for specialized educational credits and deductions which may lower your overall taxable income.

What to Consider Before You File Your Student Tax Returns

Before you file, be sure to have a conversation with your parents to determine if they plan to claim you as a dependent on their taxes. Whether they claim you or you need to file on your own, you’ll still want to round up information related to your school costs and student loan information.

Dependent vs. Independent Status

Your parents may be able to claim you as a dependent if:  

  • Your parents pay more than half of your living expenses.
  • You live with your parents when you are not away at school.
  • You’re a student under 24 years of age.
  • You are unmarried or are married but file taxes separately from your spouse.
  • You’re a U.S. citizen.

The IRS offers a few simple tests to determine whether you’re eligible to be claimed as a dependent. You have to pass all the tests (age, residency, joint return, citizenship, relationship and support) to be eligible to be claimed as a dependent.

Ultimately, it’ll come down to your finances and whether your family is the primary source of your income or if you get income primarily from a job or from student loans. Student loans are not taxable since you have to repay them, but they are considered a form of support for an independent filer if they are the sole signer on the loans.

If your parents pay for more than half of the costs for your lodging, food, clothing, education, medical and dental care, recreation, transportation and/or similar necessities, then they can claim you as a dependent. If you pay for more than half of these expenses, then you are an independent filer. If you lived with your parents and gave them money to cover bills, they must have contributed more than you did to your living costs.

For example, if you worked part-time and paid $4,200 over the year to your parents to help cover bills ($350 a month), then they must have paid at least $4,201 to cover the remainder of your living expenses to be able to claim you as a dependent.

Student Expenses

Students are eligible to deduct up to $4,000 of eligible education-related costs. Keep track of the costs of your books, study guides, notebooks, subscriptions to websites and periodicals you need for class, as well as any education-related subscriptions. Your school will mail you a 1098-T form, which is your tuition statement. It will show how much you paid in tuition and related expenses, like student access fees and any scholarships or grants you received.

1098-T Form for student tax returns. Source: IRS.gov
1098-T Form Source: IRS.gov

Student Loan Interest

Student loans allow you to defer your payments until after you graduate. The government pays interest on Federal Stafford loans while you are in school but the interest charged on private loans begins accruing the day you take the loan out.

If you made any payments on your student loans, you can deduct the interest you paid. If you paid over $600 in interest, your lender will send you a 1098-E form. Even if you paid less than $600, you can deduct the interest paid (remember, that’s the interest only, not your whole payment). If you didn’t get a 1098-E form from your lender, you can still figure out the amount you paid in interest by contacting your lender or checking your annual statement.

1098-E Form Source: IRS.gov
1098-E Form Source: IRS.gov

Student Credits

In addition to deductions, the IRS offers some credits to students: the American Opportunity Credit and the Lifetime Learning Credit.

American Opportunity Credit

The American Opportunity Credit is for up to $2,500 in qualified deductions for education expenses and tuition. This credit is 40% refundable up to $1,000, which means that if you owe no tax or the credit satisfies your amount owed, the IRS will give you a refund of up to $1,000. You qualify for the credit if you have not completed your bachelor’s degree and are enrolled in a degree- or certificate-seeking program at least part time at an accredited school.

You also may not have a felony drug conviction and your income must be under $80,000 or $160,000 if filing jointly. You can still qualify for reduced credit with an income up to $90,000 or $180,000 if filing jointly, but above that, you cannot qualify for the credit at all. You can claim the credit for up to four years, regardless of how many years you are a student, and you can claim it if you are a dependent.

Lifetime Learning Credit

Another credit offered to students is the Lifetime Learning Credit, which can be claimed for up to $2,000 in qualified education expenses for degree-seeking, credential, higher education or job skills courses at an accredited educational institution. That means that trade schools and non-degree courses are included. You must have been enrolled in school for at least one academic period. You are not excluded from claiming the credit if you have a felony drug conviction.

The income limits are lower than the American Opportunity Credit and you must earn less than $67,000 individually or $134,000 if filing jointly to qualify. You cannot claim this credit if you are a dependent, but your parent claiming you can claim this credit for your educational expenses. The credit is not refundable, so while it could reduce the amount you owe all the way down to zero, you cannot get any of it refunded to you.

How to File Your Student Tax Returns

How you choose to file your taxes depends in large part by how your parents file. If they claim you as a dependent, they will include you on their tax forms. If you file independently, you will likely choose between filing using tax software or with a tax professional, as those are the most popular choices.

Documents You’ll Need

Depending on your sources of income, you will need to gather the following documents to file your income taxes.

  • W-2: If you work at all (even if part-time or just during the summer) you will need a copy of your W-2 earnings statement.
  • 1099: If you earned more than $600 from a single employer for contract work like driving for ride-sharing apps, grass cutting, babysitting or dog walking, be sure you receive a 1099 form from the company or person you worked for.
  • Self-employment records. If you worked in any self-employed business, even if just part-time, that income is still taxable and you will owe self-employment tax.
  • Form 1098-E. If you paid any student loan interest in the tax year, your lender will send you this form.
  • Form 1098-T. Your school will send you this form for tuition payments you paid and any scholarships or grants you received.

Choose Your Filing Method

You can file your own taxes with the help of a tax professional or tax software. Tax software offers great tools to walk you through the process. If you would prefer a tax professional, ask your parents who they use to file or ask your school for a recommendation for a student-friendly CPA with low fees.

You can check with the business office at your school to see if it has resources available, like free tax software or free help from CPAs. The IRS also offers a volunteer assistance program to help you file your taxes if you have an income under $55,000, are disabled or speak limited English.

Get a Handle on Your Taxes

Whether you can be claimed by your parents as a dependent or whether you have to file independently, you can take advantage of several deductions and credits to reduce the amount you owe on any income you earn. Get a handle on these basic tax issues to prepare you to tackle your return.