Filing taxes may not be at the top of your college to-do list, but understanding the basics can save you money and prevent future headaches.
Whether you have a part-time job, receive financial support or work as a freelancer, it is essential that you know what your tax obligations are.
You may even be eligible for deductions or credits that could increase your refund. In this guide, we’ll provide an overview of the most important tax issues for students so you can navigate filing season with confidence.
Determine your dependency status to know if your parents can claim you as a dependent
Knowing whether your parents can claim you as a dependent will affect tax credits and deductions. If they support you financially, they may receive a tax benefit. But if you provide most of your own support, you may qualify for your own tax benefits.
Checking this will help you avoid IRS problems and ensure you file correctly.
For more information: Can I claim my girlfriend/boyfriend as a dependent? Overview, rules and tax guide
Check if you need to file by reviewing the income thresholds for your filing status
The IRS has income limits that determine whether you need to file taxes. If you earned less than a certain amount, you may not have to file a return, but you can still get a refund.
Part-time jobs, scholarships and other earnings all count. Knowing the limits will help you avoid unnecessary paperwork or missing out on money.
Understand taxable versus non-taxable income
Not all the money you receive in college is taxed. Some grants and scholarships are tax-free, while student wages and part-time jobs count as taxable income.
Understanding what the IRS considers taxable can help you avoid filing surprises. It also helps you better track your earnings.
For more information: Three Types of Income Sources You Need to Know About
File a tax return even if not required to potentially claim a refund
Even if you don’t have to file taxes, you may still be able to get a refund. If your employer has withheld taxes from your paycheck, filing a tax return may result in a refund.
This extra money can help cover books, rent, or other expenses. It’s an easy way to check if the IRS owes you money.
Take advantage of the education tax credits
Tax credits can reduce the amount you owe or increase your refund. The American Opportunity Credit helps cover tuition, books and school supplies. The Lifelong Learning Credit applies to a wider range of education expenses.
Claiming this can help reduce the financial burden of college.
For more information: How to pay for college without loans and student debt
Report all sources of income
You must declare all the money you earn in your tax return. This includes wages from jobs, freelancing, or side hustles such as food delivery and ride sharing.
Failure to report all income may result in fines or IRS audits. Keeping track of all income makes tax time easier and avoids mistakes.
For more information: Do you have to file a tax return if you have no income?
Use free tax filing services like IRS Free File or VITA if you qualify
Paying for tax software or an accountant is not always necessary. The IRS Free File program and VITA offer free tax help for eligible students.
These services can guide you in properly filing and claiming the right credits. Using them will save you money and prevent mistakes.
For more information: File taxes online in one afternoon
Track deductible expenses for school
Certain expenses can reduce the amount of taxes you owe. If you pay interest on your student debt, you may qualify for a deduction. Books, supplies and tuition may also be deductible in some cases.
Keeping receipts and records makes it easier to claim these tax benefits.
For more information: 10 ways to drastically cut costs now
Consider state taxes if you attend college in a state other than your permanent residence
Living in one state but going to school in another can make taxes tricky. Some states require you to file taxes in both places.
Checking state tax laws early can help you prepare and avoid last-minute surprises. Knowing where to file a tax return will ensure that you pay the correct amount and don’t pay too much.
Set aside money for self-employment taxes
If you make money from gigs or freelance work, taxes are not automatically withheld. This means you may owe self-employment tax.
By setting aside some of your income throughout the year, you can avoid a large tax bill later. Planning ahead makes it easier to cover what you owe.
For more information: Tax Filing Tips for the Self-Employed
Check if you qualify for tax deductions
Some expenses can reduce your taxable income. If you moved for a new job, you may be able to deduct moving costs. Contributions to an IRA can also provide tax savings.
Checking which deductions apply to you can help reduce your amount owed or increase your refund.
Avoid missing tax deadlines to avoid penalties and interest
Filing late may result in fines and additional costs. If you owe money, waiting too long could make your tax bill even bigger.
Writing deadlines into your calendar will help you submit on time and avoid stress. Filing early will also ensure that you receive a refund sooner.
For more information: Filing Taxes Without a W2: The Simple Guide
Deposit your refund immediately for faster processing and safe receipt of funds
Choosing direct deposit is the fastest way to get a tax refund. It’s more secure than waiting for a check in the mail and reduces the risk of lost or stolen payments.
Additionally, the IRS processes electronic refunds more quickly. If you need the money quickly, this is the best option.
Ask for help if necessary
Taxes can be confusing, especially for first-time filers. Many colleges offer free resources, such as using campus resources or help with tax preparation. If you’re unsure, a tax professional can help you avoid mistakes.
Getting help will ensure you file correctly and don’t miss out on any savings.
Why do you owe taxes this year?
If you owe taxes, it may be due to underpaid deductions or untaxed side income. Some jobs don’t take enough taxes out of your paycheck, leaving you with an outstanding bill.
Freelancers and gig workers often don’t realize they need to put money aside. Understanding why will help you plan better for next year.
For more information: Why do I owe taxes this year? 10 reasons to spot
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