Tips for Students During Tax Season

March 6, 2012 | posted by College Money Insider.

College is a time of firsts. For many of you, it’s your first time living away from home. It could be your first time having a roommate. It’s maybe even your first time doing your own laundry (Hope you didn’t shrink your favorite shirt!). With March already in full swing, there’s a good chance you’re preparing for another first—your first time filing taxes. This is an important rite of passage to adulthood, but it can be stressful and overwhelming nonetheless. We’d love to alleviate as much of your stress as possible, so here are some tips to keep in mind during tax season:

Make sure you file a tax return, but carefully consider your dependency status. If you are working part-time during college, then there is a good chance the government has withheld some money from your paycheck, and you might be eligible for a refund. By law, you are only required to file a tax return if you make a certain amount of money, but it’s still a good idea to file even if you make less than the earning threshold. You might be surprised at the refund you receive!

While you might collect a nice-sized refund as an independent, it could still pale in comparison to deductions your parents can get by claiming you as a dependent. If your parents are paying for a lot of your expenses, then you should discuss your financial situation with them, and see whether it’s more cost-effective to file as a dependent or independent.

Take advantage of student tax credits/deductions. The government is sympathetic to the financial plight that many students face, and has created various tax credits and deductions for students to help ease your burden. You can only use one of the following provisions, so make sure that the one you pick is right for you:

  • Lifetime Learning Tax Credit

    • Tax credit that is applied to college tuition and other fees necessary for enrollment

    • Up to $2,000 credit on your first $10,000 of qualifying expenses

    • Available to all post-secondary students, or parents who claim them as dependents

    • Both part-time and full-time students are eligible

  • American Opportunity Tax Credit

    • Tax credit that is applied to college tuition, other fees necessary for enrollment, and course supplies/materials

    • Up to $2,500 credit on your first $4,000 of qualifying expenses

    • Available only to 4-year undergraduate students, or parents who claim them as dependents

    • Must be enrolled at least half-time to be eligible

  • Tuition and Fees Deduction

    • Tax deduction that is applied to college tuition and other fees that are necessary for enrollment

    • Up to $400 deduction

    • Available to students who pay for their post-secondary education, or parents who claim their college-going kids as dependents

    • Both part-time and full-time students are eligible

Look for no-cost or low-cost tax preparation. It’s very likely you will have some questions when doing your taxes, but you don’t necessarily have to shell out an arm and a leg to get quality advice. Many college career centers put on tax clinics and workshops around campus, where they have staff designated to help with your concerns. You can also check out your school’s accounting department, or even a fraternity or sorority, to see if they provide volunteer tax services. Tax prep software programs are another avenue to explore, as they are user-friendly and relatively inexpensive.

For further tax-related information, be sure to check out the IRS website. If you have additional tax tips that could be helpful to students, then let us know in the comments!

Image: renjith krishnan