Filing taxes as a college student comes with a unique set of challenges. And determining whether and how to file taxes requires taking note of your previous year’s employment, wages, tax withholding and parents’ tax strategies. You may want to take a moment to bring up a few tax questions with Mom and Dad.
So do college students have to file a tax return? The answer depends on their income, dependency status and other variables. Here’s what college students should know about filing taxes.
Do College Students Need to File Taxes?
Like the answer to any tax question, it depends. Students who earned an income of less than $12,200, which is the standard deduction for taxes filed in 2020, aren’t required to file a tax return. But they may still want to file if they had income taxes withheld on their paychecks. That’s because if they don’t submit a tax return, they may end up forfeiting money owed to them by Uncle Sam if they had too much withheld, for example.
“Any time you have withholding on a W-2, go ahead and file, even if it’s less than (the standard deduction),” says Amy Barry, a certified public accountant in Bellevue, Washington. The way to determine whether you have W-2 income is to check your pay stub, which should have a specific box that labels withholdings, Barry says.
Take note of the tax impact of any side hustle you do. Working in the gig economy by, say, driving for a ride-hailing service or delivering sandwiches through a task-management app can also have an impact on tax liability. Those jobs have tax consequences, and you’ll want to track related costs, consider whether to deduct miles or other qualified expenses and review other tax-filing requirements if you contracted services through a side hustle.
Ask Mom and Dad if They’ll Claim You as a Dependent
Pick up the phone. Call Mom and Dad.
The goal with this call is to determine whether you can – or should – be claimed as a dependent on your parents’ tax returns. Being listed as a dependent may allow your parents to claim certain tax benefits while prohibiting you from cashing in on those benefits yourself, so your family will have to evaluate its overall tax situation to determine the best move.
“Look at the big picture here, not just yourself, but your family, too,” says Lawrence Pon, a tax specialist who owns an accounting firm in San Francisco.
Pon also notes that if your parents claim you as a dependent, you will not receive the up to $1,200 coronavirus stimulus check.
Note that to qualify as a dependent, you need to meet certain age, relationship and financial support requirements, so this step might not apply to older students or those who have their own families.
Generally, if your parents earned around $80,000 or more in 2019, the student should not be claimed as a dependent, Barry says. (Although, she notes, that’s just a benchmark and not a hard-and-fast rule since tax calculations are complex.) That way, the student can tap certain educational tax credits for which the parents make too much money to qualify, she says.
The first education tax credit to consider if you’re within the first four years of college is the American opportunity tax credit, commonly called the AOTC, Barry says. If this $2,500 refundable tax credit brings your taxes owed to zero, you can have up to $1,000 refunded to you. That can put some extra money in the pocket of a cash-strapped student or parent.
For graduate students who may not be eligible for the AOTC, taking a deduction for tuition and fees, which can reduce the amount of income subject to tax by up to $4,000, or tapping the lifetime learning credit, which is worth up to $2,000 per tax year, are also good options, says Gina Chironis, a certified public accountant and personal financial specialist in Irvine, California.
If your parents don’t claim you as a dependent, keep in mind that this doesn’t dictate your dependency status on the Free Application for Federal Student Aid, or FAFSA, experts say. So filing taxes independently from Mom and Dad isn’t going to necessarily translate to a better or different financial aid package next year.
Look Out for These Forms
Like any taxpayer, college students should be on the lookout for essential tax forms and documents. If they worked a traditional part-time job, they’ll receive a W-2 tax document. A 1098-T tallies expenses paid to the college or university, and a 1098-E summarizes student loan interest payments. A 1099 may document money earned through an app, such as Uber.
Since students move often, it’s essential that they provide an up-to-date address to any entity that might mail tax documents. They should also check their student mailbox – or see if mail can be forwarded to their home address if they’re quarantining off-campus – and log into their college email addresses. Some forms may be downloadable on a financial aid website or through an employment portal.
File Taxes for Free
Unless you have a complex tax situation or prefer to work with your parents’ tax professional, it shouldn’t cost you anything to file your taxes as a student.
For low-earning students who have simple taxes, the Internal Revenue Service’s Free File program guarantees free versions of popular tax software options for people making less than $69,000 in adjusted gross income. To access the program, go to the IRS Free File website. This is an important step. The so-called free products from tax software companies not accessed through the IRS portal may still tack on fees and upcharges. The IRS version is truly free for those who qualify.
Your school may also have a Volunteer Income Tax Assistance, or VITA, program on campus, Barry says. VITA offers free tax advice to qualified individuals. Check with your financial aid office or the business or accounting schools to determine whether volunteers come to your campus.
The Coronavirus Pandemic and Taxes
It’s worth considering the impact on your tax situation of any refunds you receive from colleges due to the novel coronavirus, Pon says. If you used money from a 529 college savings plan to pay for any college expenses that were refunded, contact your plan administrator to have the funds contributed back to your account. “Otherwise, you may be subject to taxes and penalties if your college costs are less than the distributions taken from the 529 plan,” Pon says.