Here’s what college students need to know about filing taxes and how to make the most of some special tax benefits.
Do College Students Need to File?
The answer depends on their income and whether they had employers withhold taxes from their paychecks.
Students who are single and earned more than the $13,850 standard deduction in tax year 2023 must file an income tax return. That $13,850 includes earned income (from a job) and unearned income (like investments).
They must also file a return if their unearned income (including interest and dividends, unemployment compensation and income as a beneficiary of a retirement plan) is greater than $1,250 or their self-employment income is more than $400, says Mark Steber, chief tax information officer for Jackson Hewitt Tax Service. For more insight, visit the IRS Tax Information for Students guide.
College students may still want to file a return even if it’s not a requirement.
“If wages are less than $13,850, the student should still consider filing to receive refunds from federal and state withholding taxes,” says Michael Trank, a CPA and personal financial specialist at Wertz and Company in Irvine, California.
In other words, if students had their employers withhold income taxes from their paychecks, they can file returns and get refunds.
Do Your Parents Claim You as a Dependent?
Whether your parents can claim you as a dependent is based on your age, student status and who’s paying the bills.
“Generally, a parent can claim you as a dependent until age 19, but if you are a full-time student they can claim you as a dependent until age 24,” says Brittany Benson, lead tax research analyst at The Tax Institute at H&R Block.
There are also other requirements, including how much financial support your parents are providing. A full-time college student is generally a dependent if they’re younger than 24 and don’t provide more than half their own support, among other rules, Benson says.
Part-time students who are 19 or older might not be dependents.
“If a child is going to school part time, is over 19 and they are working and making more than $4,700, they are not a dependent,” Steber says.
For more information, see IRS Publication 501 Dependents, Standard Deduction and Filing Information.
Parents Might Be Eligible for the American Opportunity Credit
If your parents claim you as a dependent, they may be eligible to take the American opportunity credit during your first four years of postsecondary education. This helps cover eligible college costs like tuition, books and supplies.
The credit can be worth up to $2,500 for tax year 2023. To qualify, the student must be enrolled at least half time and pursuing a degree or other recognized educational credential, among other requirements.
Students whose parents aren’t able to claim them as dependents but who meet other requirements may be able to take the credit themselves, Steber says.
You or Your Parents May Be Able to Take the Lifetime Learning Credit
Students in graduate school or who aren’t attending college at least part time may be eligible for the lifetime learning credit, which is worth up to 20% of eligible expenses, with a maximum credit of $2,000 per return. If your parents claim you as a dependent, they may be able to take the credit.
[Read: Educational Tax Credits and Deductions You Can Claim for Tax Year 2023]
To claim the full credit, your modified adjusted gross income must be $80,000 or less if you’re filing as single or as head of household, or $160,000 or less if you’re married filing jointly.
You can claim a partial credit if your MAGI is more than $80,000 but less than $90,000 if you’re filing as single or as head of household, or more than $160,000 but less than $180,000 if you’re married filing jointly.
For more information, visit IRS Publication 970 Tax Benefits for Education.
What Tax Forms Do You Need?
U.S. residents file federal income tax returns with Form 1040, but you may need to include additional forms like Schedule C and Schedule SE if you have self-employment income.
You should receive W-2s from your full- or part-time employer(s) reporting your income and any taxes they withheld — or 1099s reporting income from freelance work or dividends, interest or capital gains from investment brokerage firms or banks.
You may also receive Form 1098-T showing the tuition you paid in 2023 and Form 1098-E reporting any student loan interest payments.
[READ: Tax Prep Checklist: Collect These Forms Before You File]
How to File Taxes for Free
If you’re in college, money is likely tight. If you have a straightforward return, you can generally file your taxes for free.
Taxpayers with adjusted gross incomes of $79,000 or less can prepare and file their 2023 federal income taxes online for free through IRS Free File.
If you have a simple return, you may also be able to use other programs for free, such as some TurboTax and H&R Block versions.
If you want personal assistance, you may be able to get free tax help from the IRS Volunteer Income Tax Assistance program, which might be available on campus or in your community.
The program aims to provide assistance to those who make less than $64,000 per year, people with disabilities and people with limited English-speaking skills. You can look up VITA sites in your area by using the IRS locator tool. For more information see the IRS’s Free Tax Return Preparation page.
You can also work with an in-person or online tax preparation service, such as H&R Block or Jackson Hewitt Tax Services.
Or you might consider consulting an independent tax preparer — either in person or virtually. You can check a tax preparer’s credentials by using the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.
Smart Tax Move for Working Students: Contribute to a Roth IRA
If you’ve earned any income from working, consider contributing to a Roth IRA.
If you’re under 50, you can contribute up to $6,500 from income you earned during tax year 2023 — whether or not you file your own return.
You have until April 15, 2024, to contribute to a Roth IRA for tax year 2023. The contribution limits increase to $7,000 for 2024.
Roth contributions aren’t tax deductible, but the money grows tax free and you can withdraw earnings tax free after you reach age 59 1/2.
Roth IRAs can give students a huge head start on their financial future. “It’s never too early to start saving for retirement,” Trank says.
[Read: How to Open a Roth IRA.]
Roth IRA Flexibility Benefits Students
Roth IRAs can be especially attractive to young investors because of their flexibility, says Rita Assaf, vice president of retirement products at Fidelity Investments.
“The most attractive feature about Roth IRAs, especially for younger investors, is the ability to withdraw money before retirement,” she says.
You can also withdraw your contributions without penalties or taxes at any time and for any reason.
As long as five years have passed since your first Roth contribution, earnings from a Roth IRA can also be withdrawn federally tax free and penalty free, provided you use the money for specific reasons, such as qualified higher education expenses (which can include college-related expenses), qualified first home purchases (up to $10,000) and certain medical expenses, Assaf says.
“The rollover is subject to annual Roth contribution limits and an aggregate lifetime limit of $35,000. This is an attractive option for many, as it not only removes some of the barriers to saving for higher education, it allows for that education savings to now go toward a Roth IRA for the same beneficiary, giving them a head start for retirement,” she adds.
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Tax Filing Tips for College Students originally appeared on usnews.com
Update 02/28/24: This story was published at an earlier date and has been updated with new information.
