Whether you are in college for the first time or on your way to the finish your degree, being a student presents special financial challenges.
Know how the university could affect your taxes can help you plan ahead and identify the tax benefits that can make your finances a little easier when you hit the books.
Awards may be taxable or not taxable
Most scholarships are not taxable income. Scholarship and fellowship amounts that you use to pay your tuition, books, supplies and equipment while pursuing a degree are tax-free.
Generally, if you are paid for the services you need to make as a condition of the grant, you must include the payments in its taxable income.
education credits and deductions can save you money
the first credit, you should look into is the American opportunity credit. It pays to essentially the first installment of $ 2,000 you spend on tuition, fees, books, supplies and equipment. If you qualify, it also gives you 25 percent of the next $ 2,000 return, for a maximum credit of up to $ 2,500. The American opportunity credit is good for four years of undergraduate study.
Another credit you should be aware is the Lifetime Learning Credit. It gives you a tax credit equal to 20 percent of tuition and certain related expenses up to $ 10,000. The maximum credit is $ 2,000.
creditBoth studies are eliminated for higher-income taxpayers. If you are a dependent, you can not claim the credit, but your parents may be.
You can not use the same expenses for a tax benefit, and you can not claim both credits for the same student in the same year.
Avoid the penalty for not carrying health insurance
If you do not have health insurance in 2015, you might have to pay a $ 325 per person or 2 for penalty percent of your annual household income, whichever is greater. You should not worry about the penalty if you are not insured for more than two months of the year, or if your income is low enough that you need not file a tax return.
You may be able to get insurance fully or partially subsidized by health insurance markets, also known as exchanges. Your state may have its own market or you can use the health insurance market from the federal government.
If your parents have health insurance, you may be able to stay on their plan until you turn 26. The coverage probably isn 't free, but it is often cheaper than to try to buy insurance yourself.
How to tell if you need to file a tax return
as a student, you can not make enough money to have to file a tax return. However, if you work during the summer or enter a program of work / study in school, it may be time to start filing tax returns.
If you are not a dependent on your parents or someone else return, you usually file if your gross income is $ 10,300 or more for 2015 ($ 20,0 if filing jointly). If you file as head of household (usually because you have a child), you must file if your gross income is $ 13,250 or more.
Even if your gross income is lower, you may have to file if your parents or other people can ask you as a dependent on their return (if they actually do or not). If your filing status is single, you must file a return if any of the following conditions are true in 2015:
- Your unearned income such as interest and dividends, was more $ 1,000, or
- earned income, such as wages, was more than $ 6.300, or
- your gross income was more than the greater of $ 1,000 or your earned income ( up $ 6.300) plus $ 350.
Even if you are not required to file a tax return, you must file if you had federal income tax or state withheld from your salary. It's worth the few minutes it takes to know if you have an upcoming tax refund.
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