Get these tax-breaks as a college student.
Finding every possible way to save money is important in college—that includes saving on taxes. A tax deduction reduces your taxable income. A tax credit shrinks the amount of money you owe in taxes. There are other tax moves to make to ensure you pay exactly what you owe the government, and not a penny more or a dollar less. Keep the following tax tips in mind as tax season fast approaches.
Multiple W-2s. There are two different scenarios for multiple W-2s: either you worked more than one job at the same time, or you worked one job and left it then sometime later started a new job. Either way, you don’t have to worry too much. You most likely had enough withheld if you experienced the second scenario. There is a chance you could owe the IRS if you worked two jobs at the same time, depending on how you filled out your deductions. Using tax software will show you if this is the case.
Student loans. Qualified student loans can be deducted. You’ll need a 1098-E Form to do this. If you paid more than $600 in student loan interest, your lender should send you the form. Note, it’s not that you paid $600 in total on loans; you must have paid $600 in interest alone.
Education credits. The American Opportunity Credit and the Life Learning Credit are both chances for you to get a tax credit. For both of these you’ll need a 1098-T Form and an 8863 Form. Education credits can cover anything from tuition, related expenses, scholarships or grants, and any adjustments from last year. Your school should provide you with the 1098. The difference between the AOC and the LLC is that you can actually get money back on the AOC, where the LLC will only reduce your owed taxes.
Scholarships. In short, scholarships, grants, and fellowships are tax-free and don’t count toward income taxes. That is if all the money is being spent on tuition, fees, books, or other educational necessities. If you use that money for any other reason, then you will owe some taxes. So if you’d don’t have another source of income and you buy a car or use that scholarship money to go out, you would have to pay taxes on that money as income.
Tuition. Until 2017, you could deduct up to $4,000 for tuition and other qualified costs. The tax laws changed and this is no longer an option. Sorry.
Taxes can be complicated in college. And you most likely don’t have a lot of spare cash lying around to pay an accountant. Step one is to do your homework and make sure you have all the forms you’ll need to get every deduction and credit you have coming your way. So double-check that you have:
After that, you can use one of the services on the IRS Free File list. There are a few options, and they all meet the minimum requirements of the IRS. You could also look around and see if your credit union has any deals on tax software or preparation service. You may also find tax software deals through your campus bookstore, and some colleges and universities offer tax prep help for students. A few minutes of work this fall will save you a huge headache come April 15th next year.