5 Important Tax Tips for College Students
Tax tips to make tax season a breeze
College students can benefit from write offs and deductions if they file their income tax returns. Yet, for many college students, filling out tax forms and filing taxes can be a little complicated and may result in costly mistakes. For instance, for students who are making their first tax filings, it is usually difficult to know what to include in the returns, especially if the student earns just a scanty income through a part-time or summer job while at school. According to tax experts, college students should file taxes, whether they are required by law to do so or not because even students earning low income can have money withheld from their paychecks if they are not filing tax returns. Below are vital tax tips for college students.
Tip 1: Start Filing Taxes Early Even If You Do Not Have To
It is a common mistake among students to avoid filing taxes just because they feel they do not have to because of their low income. Yet filing taxes can help to prevent the withholding of student money from paychecks, and may allow them to get refunds if their money is withheld. Therefore, it is important for students to start early by picking W-2s or going online to download federal and state tax forms and taking a clearer look at tax issues related to their immediate income situations in advance. If you are a student who needs help with taxes, you just need to knock on the door of your college accounting department and you will find free tax help.
Tip 2: Collect All Required Documents and Stay Organized
Proper organization is one of the most important tax tips for college students. Meticulous organization can allow college students never to overlook important tax issues and to reduce mistakes in their tax filing. Therefore, as a college student, you should seek the right tax advice, collect all the requisite documents, and take a weekend off to file your taxes. While filling the forms never usually takes long, taking a weekend off allows you to take your time and understand the details of the filing process, to take a few breaks when you feel tired, and to double-check the correctness of your entries. Moreover, before you can file your taxes electronically, it is prudent to practice on-paper filing and to get everything right before going online.
Tip 3: Establish a Clear Dependency Status
As a student, you must know whether you are considered a dependent or not before you can file your taxes because your dependency status can cause complications and lead to tax filing errors. For instance, when you are still a dependent of your parents, you are not allowed to take a personal exemption from your returns, but it is your parents who can claim the dependency exemption. And when you stop being a dependent, you can now claim the personal exemption and a standard deduction which usually increases the filing threshold. As a rule, if you are a college student who is not providing for more than 50% of your support and living expenses, then you are not entitled to personal exemption.
Tip 4: Take Extra Credit
College students (and even parents who pay college tuition) usually get a little help from the government through deductions and credits. There are three major credits: hope scholarship credit, lifetime learning credit, and higher education expenses deduction. The Hope Scholarship Credit offers a tax credit of up to 100-percent on the first $1000 in tuition and other college-related costs, and up to 50-percent for the next $1,000, with the maximum credit being $1,500. This credit is only for the first 2 years of college. The Lifetime Learning Credit offers a tax credit of 20-percent on the tuition and other related expenses of up to $10,000, allowing a maximum credit of $2,000. Higher Education Expenses Deduction allow up to a deduction of $4,000 for families that meet the earning guidelines. Only one credit can be claimed by a student or by the student’s parents.
Tip 5: Avoid the Dual Taxes Error
If you are a student with a part-time job while you study in a school located in a different state and still having a job in your home state, you are responsible for filing the taxes separately. For instance, if you are a resident of Massachusetts who has crossed to study in a school in North Carolina, you will have to file 100% taxes on your Massachusetts income because you are a resident of the state. However, you will get a credit on the Massachusetts return for the taxes you pay in North Carolina on your North Carolina’s part-time income. In fact, it is important to research meticulously and to understand all the tax laws in both states that apply to your situation so you can avoid tax filing mistakes.
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