When someone turns 18, they are presented with many new opportunities—including high school graduation, the first year of college, studying, and new job opportunities. This important year also marks the first time that adults can begin filing their own tax return.
Thankfully, there are a number of resources available for first-time tax filers. Some colleges may offer free advice and tax preparation. If not, a professional service can provide you with dependable guidance. To help get you started, here’s a guide explaining whether you need to file a tax return as a college student, what a dependency status is, and what you need to know about deductions.
Steps For College Students Filing Taxes
Here are the absolute necessities when filing taxes for the first time, or if you are a college student still relatively new to the process:
- Determine your dependency status.
- Gather the correct tax forms.
- Claim credits you are eligible for, including education tax breaks.
- Claim any higher education tax deductions you qualify for.
Your dependency status is the most important consideration—as it determines how your taxes will be handled for the year.
First, get on the same page with your parents. Even though you are away at college, you can still be claimed as a dependent by your parents up to the age of 24 if you attend college full-time. Otherwise, parents can only claim children as dependents until they reach the age of 19.
Having your parents claim you as a dependent up until the age of 24 is usually a good idea, and can be beneficial to both you and your parents. However, it does make you ineligible for any type of credits or deductions, so there could be instances where you decide it is not in your best interest.
If you are not on the same page as your parents and they claim you as a dependent on their return, it no longer matters what you claim on your return because it is negated based on dependency.
If your parents continue to claim you as a dependent until the age of 24, you can still file taxes, but you need to indicate on the return that someone else has claimed you as their dependent.
Forms & Documentation You Need
New to taxes? Here are some documents and forms you need to organize before you file a federal tax return:
- W-2: This tax document is sent to you by the employer(s) you worked for this past year. It will describe how much you earned, as well as how much in taxes were withheld from your paycheck.
- Form 1098-T: This form is your tuition statement. It is provided by the higher education institution and sent to you in the mail. The statement includes information you will need if you plan to claim any education credits. Remember, you can only claim tax credits if you are not claimed as someone else’s dependent.
- Form 8863: This form includes the information needed to prove eligibility for the American Opportunity Credit and Lifetime Learning Credit.
- Form 1098-E: This form shows you how much interest was collected for qualified student loans. You can deduct this interest from taxes as long as you paid more than $600 in interest. The lender will send you the document if you qualify.
Education Tax Credits to Consider
If you are not claimed as anyone’s dependent as a college student, you should definitely take advantage of the numerous education credits offered by the IRS. Education tax credits like these will help reduce your tax liability:
- The American Opportunity Credit
- Lifetime Learning Credit
There are several other deductions you can claim; if you earned more than the standard deduction, then you are entitled to it. Furthermore, you or your parents can deduct up to $4,000 of qualified costs for college, including the following:
- Tuition fees for attendance.
- Required fees for enrollment.
- Required course materials like books and supplies.
- Student loan interest on qualified loans.
Find Tax Help with Levy & Associates
There are other circumstances that affect college students’ taxes, like how you should deal with reporting scholarship earnings—and if you need to file a tax return based on reported income. To get more answers to questions specific to your circumstances, be sure to contact Levy & Associates. We have over 20 years of tax consultation experience. Call 800-TAX-LEVY—or visit us online at www.levytaxhelp.com.