No one likes preparing tax return forms each year, with the vast amount of regulations put in place by the IRS you must abide by. These forms can be even more daunting for college students because of the amount of student loans, scholarships and grants they must have the correct tax information for. There are however, a number of tax tips college students can use to help them ease the pressure of filling in the relevant forms and also to get specific tax deductions students are entitled to.
Get a head-start: Try to make a start on your tax returns as soon as you can. Don’t leave it until the last minute. Starting early will give you plenty of time to make sure you have everything in place and to research a few of the credits, or deductions you as a student may be entitled to.
Prepare a rough copy: Drawing up a rough copy of your tax returns before you fill in the proper forms, or complete them online, will help you work out if everything adds up before you actually submit them to the IRS. Doing so can often help to avoid making any mistakes, as you can check it over a couple of times.
Get help: If you find yourself struggling to make the numbers add up you may find that making use of a professional tax man useful. Although it will cost a bit of money, An accountant may be able to advise you of some of the benefits you would otherwise know nothing about.
Tax credits
There are many credits students are able to get if they are paying for their own taxes and are not registered on their parents tax forms. These credits allow students to deduct the amount of the specific credit from their earnings. Some of the common credits available to students include:
- Hope Scholarship credit: The Hope Scholarship Credit is available to students within the first four years of their education and allows a deduction of up to $2,500.
- Lifetime Learning Credit: The Lifetime Learning Credit can be taken advantage of by most students. There is no limit to the amount of years students can apply this credit to their tax returns and can account for up to $2,000 per year.
- American Opportunity Credit: The American Opportunity Credit is the most widely used credits by students. In most cases it is available to students who have a gross income of $80,000 or less ($160,000 for married couples). This credit can account for up to $2,500 per student.
Deductions
There are specific tax deductions students are entitled to use to lower the amount of tax they have to pay. Many students don’t realise that a lot of expenses related to education are tax deductible, so it is important to do your research if you want to save a but of money.
- Student loan Interest: Up to $2,500 per year may be deducted if you are repaying a student loan. This applies to students who are still in education and repaying their loan, or students who have graduated and are repaying their student loan.
- Tuition Deductions: Tuition and fee deductions are available to students in their last year. If you are a student and are earning less than $65,000 each year and can be worth up to $4,000 in some cases.
- College Savings: Many people are entitled to a tax deduction on money they have in a college savings plan. You may be entitled to receive this deduction if you are saving for your, or a dependants college tuition.
