How to File Taxes as a College Student

 

Being a college student should be an exciting and challenging time for you, but figuring out how to file taxes as a college student doesn’t need to add to those challenges.

In today’s post, I will help you determine whether or not you should file taxes while in college. I’ll also walk you through the steps you should take when filing your income tax return.

Do I need to file taxes if I’m a college student?

Even if your parents claim you as a dependent when filing their taxes, you may still need to file your own income tax return. If any of these situations applies to you, then you must file:

  • If you earned more than the standard deduction during the course of the year ($12,550 in 2021), then you must file an income tax return. That amount includes any earned income as well as what is called “unearned income,” which includes amounts from unemployment checks, interest payments, and possibly scholarship or grant money.
  • Additionally, if your unearned income alone is more than a certain amount ($1,100 in 2021) or if your net earnings were more than $400 from self-employment, you must file an income tax return.
  • Finally, if you file as head of household, then you must file an income tax return if you earn more than a certain amount ($18,800 in 2021).

Now this bit is important: Even if you aren’t required to file an income tax return based upon the factors listed above, look at your pay stubs and see if you had state or federal income taxes withheld from your paychecks. If you did, then you definitely should file a return to see if you can get money back. You should file even if you’re listed as a dependent on someone else’s tax return.

Should your parents claim you as a dependent?

If you’re a full-time student, your parents can claim you as a dependent until age 24 as long as you don’t provide more than half of your own financial support. The wording in the previous sentence is very important because even if a scholarship or someone else pays for more than half of your support while in college, your parents can still claim you as a dependent because you aren’t paying more than half.

Remember that even if you must file your own income tax return, your parents can still claim you as a dependent, but they cannot claim your income on their return. In almost all situations, it’s more advantageous in terms of tax savings for your parents to claim you as a dependent. However, if your only income is unearned income, your parents may be able to include that income on their return and you would not file a return in that situation.

If you’re older than 19, not a full-time student, and make more than $4,300 over the course of the year, your parents cannot claim you as a dependent.

How do I file taxes as a college student?

Once you’ve determined you should file an income tax return, the next step is to gather the documents and information you need. You should receive most of the forms you need from others before January 31 each year. Here’s the typical paperwork you’ll need to collect and complete:

  • You’ll need to complete a Form 1040 to file your income tax return.
  • You’ll need your Social Security Number and the previous year’s tax return (if applicable).
  • If you had a full-time or part-time job, your employer will send you a Form W-2 so you know how much income you earned as well as the amount of taxes withheld from your paychecks.
  • If you did any freelance work and made over $600 from it, your client will send you a Form 1099-NEC rather than a Form W-2.
  • If you have self-employed income, you’ll need to complete a Schedule C.
  • If you paid tuition, your school will send you Form 1098-T.
  • If you paid student loan interest, your student loan servicer will send you Form 1098-E.
  • If you have investments and received any distributions or dividends throughout the year, your financial institution will send you Form 1099-DIV, Form 1099-INT, and/or Form 1099-B.

As for the actual filing process, you can likely file for free through the IRS Free File website. As long as your Adjusted Gross Income (AGI) is under a certain amount ($73,000 for 2021), then the IRS site provides you with “partner offers” that you can choose from. These offers take you to a tax software site that will guide you through filing your income tax return. Make sure you carefully read the offers as some of the software only allows you to file your federal return for free but charge you money to file your state return.

Are there any special credits or deductions when filing taxes as a college student?

Don’t forget about the education tax credits available to you! The American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC) are the two tax credits you’ll want to investigate. Just note that you cannot use them at the same time for the same student and you cannot claim either one if you are claimed as a dependent on someone else’s income tax return (but they can!).

For traditional undergraduate students, the AOTC can get you an annual credit of up to $2,500 if you meet the eligibility requirements. Also, if the credit brings your tax liability to $0, you can get up to $1,000 more back as a refund to you. The amount you get back as a refund will be 40% of any remaining amount you’re eligible to receive.

For graduate students or students who are attending school on a less than half-time basis, the LLC can get you an annual credit of up to $2,000 if you meet the eligibility requirements. The amount of credit you’ll receive is based upon your eligible learning expenses and your income.

The other tuition-related tax-savings option for students is a student loan interest deduction that applies to required and voluntary pre-paid interest payments. You’ll be able to deduct the amount of interest you paid with a max of $2,500 if you meet the eligibility requirements. You do not have to itemize your tax return in order to take this deduction.

Action Items:

  • Determine if your parents or someone else claims you as a dependent on their taxes.
  • If you had income taxes deducted from your paychecks, file an income tax return.
  • Prior to filing, gather all of your documents, forms, and information.
  • Don’t forget to claim education-related credits and deductions.
  • After filing, keep copies of all of your documents and forms (scanned and saved somewhere secure is fine!).

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Amy Northard, CPA

The Accountant for Creatives®
+ taxes + bookkeeping + consulting
+ Hang out with me over on Instagram!

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