College can be expensive, but the IRS offers a number of tax breaks for students to make the 'higher education more affordable for more. Americans
Whether you are a parent of a student or pay your own way through school, here are 10 important things to know about the college and Taxes:
even if you do not have to file.
technically, simply file a tax return if you reach a certain level of income.
For example, if you were a dependent who earned more than $ 6,100 or a single independent declaring who has won more than $ 10,150 in 2014, you are required to file.
But even if you earned less than that, you could be due a refund if your employer withheld taxes from your check.
Take 20 minutes to drop, and you might find that you need a refund.
consider going alone.
In most cases, it makes perfect sense for a college student aged traditionally remain a dependent for tax purposes.
But there are some situations where it could be advantageous for a student to file its own statement.
For example, certain tax credits for higher education are available only for people with moderate incomes. If the parents earn too much to qualify, the student could be better file independently.
See the Lifetime Learning Credit.
The Lifetime Learning credit is one of two tax credits available to cover during college. It will pay up to $ 2,000 per year per family to help cover the costs of qualified studies.
The credit is good for each year a student is enrolled in college, graduate school or part-time learning.
US tax credit Request Opportunity.
American Opportunity tax credit is more generous, offering up to $ 2,500 per year per student, compared to the lifetime learning credit limit of $ 2,000 per family.
One drawback: you can not claim for four years per student, so no credit for higher education
the TBT could pay you
Another excellent perk of American.! tax credit for job :. the $ 2.500 credit is refundable, meaning that if you have less than $ 2,500 in taxes, you will get a refund of the difference
If you qualify for the Lifetime Learning Credit and the possibility American credit for the same student in the same year, you can choose a credit, but not both.
Deduct your student loan interest.
tens of millions of current students and college graduates to make payments of student loans each month. Such as mortgage interest, student loan interest is deductible (up to a limit of $ 2500).
Even better, you can take the deduction even if you do not itemize.
Getting a refund for work study.
Unlike other types of college financial aid (such as grants and scholarships), the money you earn from a work-study job is considered taxable income.
But it's not all bad.
The school will withhold taxes on income from your paychecks. So when it's time to file your taxes in April, you'll probably get a refund.
Pay the tax-free college.
There are two types of education savings accounts that every parent of a prospective student should know about :. 529 plans and Coverdell education savings accounts
in both cases, the money in the accounts grow tax-free, but even better, you can withdraw the money tax-free if the funds are used to pay for educational expenses.
In a crisis, press the IRA.
It is generally not a good idea to make an early withdrawal from a retirement account. Not only you are taxed on the money, but you are also hit with a 10% penalty.
There is a loophole, but for qualified education expenses.
If you withdraw money to pay for college expenses, you still owe taxes, but the 10% penalty is removed.
Geography questions.
If you are attending school in a different state of your tax household (aka your parents' house), make sure that you pay taxes on the earnings of both states.
For example, if you have a summer job at home and work part time at school, different tax rates may apply.
You might even get lucky and work in a state with no income tax. Learn about the tax laws of both States and be ready to file twice if necessary.
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