Tax Breaks for College Students

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Written by: Sarah Miller for Student Choice

Tax Benefits for College Students

You’re shelling out plenty of money for college – tuition, textbooks, room and board. But what has all of that money done for you lately? (Other than getting you closer to a degree, of course.) Did you know you can take advantage of special tax breaks just for college students and their parents?

These benefits come in the form of tax credits and deductions. What’s the difference? A credit reduces the amount of income tax you have to pay. A deduction reduces the amount of your income that is taxed, which also typically lessens your tax bill. In other words, you could get a bigger tax refund!

Filing Your Taxes

Let’s back up a bit and start with the basics of filing your taxes. If you’re wondering if you should bother filing because you only work over the summer or a few hours part-time during the school year, the answer is YES! You aren’t required to file if your income is under $6,100 but you may be able to take advantage of those credits and deductions we mentioned.

  1. Before you start, ask your parents if they will be claiming you as a dependent. Typically your parents can claim you as a dependent if they provide more than half of your support, which is often the case for college students. If they plan to claim you on their taxes, you will need to answer “yes” on your return when you are asked if someone else can claim you as a dependent.
  2. Next you’ll need to gather your W2s and a list of your college expenses (tuition bills, credit card bills from textbooks, etc.) You can file with a paper form or online – the IRS offers a list of trusted “Free File” software. http://www.irs.gov/uac/Free-File:-Do-Your-Federal-Taxes-for-Free It might be a good idea to sit down with mom or dad while you complete your return in case you have any questions, especially if this is the first time you’ve filed your own tax return.

Note: if you’re receiving financial aid, TurboTax offers some tips on reporting your FAFSA money on your income tax return.

Now back to that bigger refund. Here’s a breakdown of the education credits and deductions that may be available to you or your parents:

Deducting Tuition and Fees

You may be able to deduct certain higher education expenses paid during the past year if you are not eligible for one of the credits. You cannot claim this deduction if your filing status is married filing separately or if your parents can claim you as a dependent on their tax return. This deduction can reduce the amount of your taxable income by up to $4,000.

Student Loan Interest Deduction

Once you are making payments on a qualified student loan (usually after you graduate), there is a special deduction allowed for the interest you’ve paid on your loan in the past year. Your lender should provide this statement in the mail or electronically each January. This deduction can reduce the amount of your income subject to tax by up to $2,500.

If you are beginning to pay back your Student Choice loan through your credit union, please visit your credit union’s Student Choice website to log in to your account where you’ll find all your repayment information. You can find your credit union’s website using our CU Select Tool.

If you’ve got some questions still, or you’re not sure if you’re eligible for these credits and deductions, you can use the IRS’s Interactive Tax Assistant to find out if you may be eligible. You can also read the full descriptions of the credits and deductions, including income limits, on their website. Remember – if you have questions, a good place to start is your credit union!

 

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