College students generally have a lot of things to worry about rather than their taxes. But, depending on your situation, you may have to spend some time working on your taxes. And, even better, you may actually benefit from doing so. Here are 4 reasons to look forward to filing your taxes as a student.
Claiming Yourself. As you head off to college, you and your parents should discuss who will be claiming you on their taxes. If you will be paying the majority of your own living expenses, you likely can claim yourself -- not as a dependent -- to lower your taxable income and qualify for your own tax credits. If possible, you and your parents may want to consult with a qualified accountant to determine whether you should file as a dependent or nondependent to receive the best tax benefit for the whole family.
Education Credits. There are three main ways college students can receive a tax benefit for furthering their education. The most valuable -- the American Opportunity Tax Credit worth up to $2,500 -- may be refundable to you even if you owe no taxes. Be sure to get this tax credit each year in which you are an undergraduate, though, since it can't be used for more than 4 years. The Lifetime Learning Credit is available to most students who cannot qualify for the AOTC, and it reduces your tax bill for as many years as you are attending classes. Finally, if you're a dependent whose parents earn too much to qualify for the credits, they may still be able to reduce their taxable income by the amount of tuition paid.
Scholarship Adjustments. If you receive scholarships that aren't tied to any particular type of spending (such as those that must be used for tuition), you may have the choice whether or not to include them as taxable income. Why include income if you don't have to? Many tax credits -- including education credits -- are adjusted based on how much you earn, so you may actually receive more credits by reporting a higher income.
Other Credits. In addition to tax credits directly related to your education, you may also qualify for some other tax credits that can either reduce your taxes or increase your refund. Non-traditional students over the age of 25, for example, may be able to get hundreds of dollars from the Earned Income Credit even if they have no kids. You may also qualify for the Retirement Saver's Credit if you attend school less than full time.
Being able to take advantage of any or all of these tax tips can mean hundreds or thousands of dollars back in tax refunds, which will certainly make the effort worthwhile! If you're unsure about how to qualify or file for any of these benefits, you may want to meet with a professional accountant or tax preparer to get the best result. To learn more about tax preparation, check out a site like http://www.tri-check.biz.
