We are not tax professionals and as such have only provided this information as a guideline and a means to get you started. This information is taken from the IRS website. Tax laws are always changing, and as such, this information could change. Please visit the IRS website for the most updated information or consult your tax professional.
U.S. Federal Taxes: Overview
Do you plan to have a job? If so, you need to have a basic understanding of taxes in order to be in good shape financially. We have listed some resources below to give you some guidance on being a college student and understanding your taxes. If you require more specific information, please check out the IRS website.
Am I Required to File Taxes?
- This is determined by how much money you made in the prior year and how much in taxes was withheld. If your earned income is over a certain limit as determined by the IRS, you may be required to file taxes regardless of how much was withheld from your paycheck.
- For example, a normal college student was required to file (2016) taxes if their income was equal to or greater than $10,350. These thresholds can change, and not every situation is the same. Please check the IRS Website for further guidance.
- It is recommended by the IRS that you file your taxes even if you are not required to, as you may be eligible for some type of a refund.
Some potential credits and deductions related to education
Please use this information as a guide only, as many of the benefits have income restrictions and other eligibility restrictions. For more information you should visit the IRS website.
Tuition and Fees Deduction
The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000. You may be able to deduct qualified education expenses for higher education paid during the year for yourself, your spouse or your dependent.
Student Loan Interest Deduction
You may be able to deduct up to $2,500 of the interest you paid on a qualified student loan. The deduction is claimed as an adjustment to income and is subject to income restrictions.
American Opportunity Credit
The American Opportunity Tax Credit can help parents and students pay part of the cost of the first four years of college. It can be worth as much as $2,500 per student each year, see if you or your student qualifies.
Lifetime Learning Credit
A credit for up to $2,000 per year to pay for tuition or related expenses at an eligible educational institution for you, your spouse or a dependent, if your modified adjusted gross income (MAGI) is $63,000 or less ($127,000 or less for married filing jointly). The Lifetime Learning Credit does not have a limit on the number of years it can be used per eligible student.
What are Credits and Deductions
Credits and deductions impact your taxes in different ways.
- A deduction lowers the amount of income you have that can be taxed. The benefit here depends on your tax bracket. For instance, if you are in the 15% tax bracket and have a Deduction of $500, your benefit is a $75 reduction in your taxes (15% of $500.)
- A credit will lower the amount of income tax you are required to pay. For instance, if you have a $500 Credit, then you would receive a $500 reduction to your taxes.
Typically, you should see if you can get credits before deductions, as it benefits your bottom line the most.