Are High School Students Exempt From Taxes?
Explore the tax obligations of high school students, including income thresholds, dependency status, and when to file for a refund.
Tax obligations for high school students can confuse both students and their guardians. Understanding whether young earners need to file taxes is essential for compliance and identifying potential financial benefits.
Many assume teenagers with part-time jobs or small earnings are exempt from taxes, but this isn’t always true. Factors such as income levels, dependency status, and types of income determine tax liability.
Minimum Income Thresholds for Students
A student’s tax filing requirement depends on the IRS’s minimum income thresholds. For the 2024 tax year, students must file a federal tax return if their earned income exceeds $13,850. This includes wages, salaries, and tips from jobs or internships. For unearned income, like interest or dividends, the threshold is $1,250. If a student has both earned and unearned income, filing is required if the total exceeds $1,250 or their earned income plus $400. These thresholds ensure accurate tax assessments for students with different income sources.
Dependent or Independent Status
A student’s dependency status impacts their tax obligations. Generally, students under 19—or under 24 if full-time—can be claimed as dependents if they live with their parents for more than half the year and do not provide more than half of their own financial support. Dependents are ineligible for certain tax credits, such as the Earned Income Tax Credit. Their standard deduction is limited to the greater of $1,250 or their earned income plus $400, but it cannot exceed $13,850 for 2024.
Withholding and Exempt Status
Employers withhold federal income tax based on Form W-4. Students expecting to earn below the standard deduction often claim exempt status to avoid withholding. Claiming exempt status requires accurately predicting income and tax liability. If income changes, students may need to adjust their W-4 to prevent owing taxes later. The IRS Tax Withholding Estimator can assist in determining appropriate withholding amounts.
Taxable Scholarships or Grants
Scholarships and grants are tax-free if used for qualified education expenses such as tuition, fees, books, and supplies. However, funds used for non-qualified expenses, like room and board, are taxable. For instance, if a student uses $3,000 of a $10,000 scholarship for dormitory fees, that amount is taxable. Educational institutions report scholarship distributions on Form 1098-T, which students should review to ensure accurate reporting.
When to File for a Refund
Filing a tax return allows students to recover withheld income. If earnings fall below the standard deduction threshold and federal taxes were withheld, students are likely eligible for a refund. For example, a student earning $8,000 in 2024 with $500 withheld can recover the full amount by filing. Refundable tax credits, such as the Additional Child Tax Credit or the American Opportunity Tax Credit (AOTC), may also apply to certain education expenses. Proper documentation, like Form 1098-T, is essential for claiming these credits. Filing ensures compliance and maximizes financial benefits.