One may start living alone, take up part-time work, and start making decisions on one's own that were previously made by the parent. Another rite of passage is filing taxes, which doesn't have to be a terrifying process. In actuality, you can receive money back if you file a tax return.
If you are due a tax refund, you may try to maximize it by doing these five things. Even if you most likely don't owe much in revenues, as a student you should still make certain you are receiving the return you are entitled to.
5 Tax Tips You Should Know as a College Student
These five tax suggestions will guarantee that you don't lose out on any deductions or credits come tax season.
Submit an Additional Expense Claim for Education
Your post-secondary university will provide you with a T2202 slip for the actual tuition costs, but if you paid additional costs while enrolled, you might be able to claim a tax deduction for those costs on your return.
You may be able to deduct the following additional educational costs from your income tax return:
- Your identity card's cost, examination fees, and admission costs.
- Travel, parking, and other costs are not included. Examples of equipment include lab coats, calculators, and computers.
- Get in touch with the college's student operations office to find out whatever charges are included on the T2202 slip if you're not sure if these are reflected in your T2202.
There Could Be Taxes on Part of Your Financial Support as Profit
Grants and scholarships are considered gift aid and are non-repayable. They are, therefore, a great resource for financial assistance. However, how you utilize the money may affect how it's treated when it comes time to file taxes. Generally speaking, grants and scholarships are tax-freebut only if people use them for approved educational costs.
Textbooks, school-mandated fees, and tuition are all considered qualifying costs. A loan or grant money is taxed as income if you use it for additional costs like lodging and transportation.
Receive More Points as a Student
The American Achievement Income Tax Credit and the credit for lifetime education are two state tax credits that are specially intended for college students. According to experts, students typically only qualify for the AOTC within their first four-year term of college.
If you meet the requirements, you may get a refund or credit of up to two thousand five hundred dollars, which is 100% of the initially allocated $2,000 you spend on approved educational costs and 25% of the subsequent $2,000. The following costs are considered qualified:
- Fees and tuition
- Additional costs associated with attending school.
- Books, materials, and apparatus
You are eligible to receive 40% of the balance of the credit as a refund of your taxes, up to $1,000, if the AOTC assists in reducing your tax burden to zero. You may redeem up to $2,000, or 20% of any initial $10,000 that is spent on eligible school costs during the year, using the lifetime learning credit. According to advisors, "the academic credit is eligible for claims for an unlimited number of years."
However, the credit is only meant to partially offset your tax liability because it isn't refundable. This benefit isn't as beneficial for students who anticipate receiving a tax refund. Remember that you may only use one of the aforementioned credits for education in a single year. Furthermore, tax-free financial aid such as grants and scholarships must be subtracted from your eligible educational costs; in other words, you are not allowed to take advantage of the tax benefits twice.
Pay Nothing to Submit Your Taxes
According to a famous writer and chief of an internet site that assists students in comparing institutions and locating scholarships, "the majority of college students have pretty straightforward tax returns."
According to him, if you're submitting either form, you most likely don't need to hire someone to do your tax return. Alternatively, he suggests using a free electronic tax preparation service or learning how to do it yourself. In case you are uneasy about filing taxes alone or wish to prevent errors, experts suggest checking whether your community has a Volunteering Income Tax Assistance program that offers free tax preparation and filing services.
You Must Report the Income from Your Side Projects
It's a frequent misperception that money from side gigs is tax-free. However, you have to file and pay taxes on your income whether you work as an Uber driver or an Instacart grocery delivery driver. The IRS states that the following particular sources of revenue are all subject to taxes: revenue from temporary, part-time, or full-time work.
- Income not shown on tax forms (1099-K, 1099-MISC, or W-2 statements, for example)
- Cash, virtual money (like cryptocurrencies), or property payments as forms of income.
- Even if you are the only one earning the moneyfor example, by watching neighbors' pets or taking care of their childrenyou still need to file taxes and maintain accurate records.
- Positively, you may write off costs associated with your side business. For instance, you can write off the distance you travel for business or the goods you buy.
- To obtain further information and guidance on handling and disclosing side gig earnings, consult the IRS's handbook on gig work taxes.
The Bottom Line!
It need not be frightening to file your taxes. Gaining additional money and feeling more in control of your finances might come from knowing how to optimize your tax return. When you prepare your next tax process, keep these guidelines in mind to increase your chances of receiving a larger refund.
The education loan interest tax deduction, which was previously discussed, is a useful benefit that may lower your taxable income by as much as $2,500. However, a lot of college students overlook it. Many students do not pay anything towards interest fees on their loans because they wait until after graduation, which disqualifies them from the deduction. Don't forget to read this article thoroughly to learn more.
