Should My College Student File Their Own Taxes?

College students often have various income sources, from part-time jobs to scholarships and grants. These financial activities introduce unique tax considerations. Understanding when a tax return is necessary, what information to gather, and which education benefits apply can significantly impact a student’s financial situation.

Determining Filing Requirements

A college student’s obligation to file a federal income tax return depends on their gross income, filing status, and whether they can be claimed as a dependent. For the 2024 tax year, a single dependent student must file if their unearned income exceeds $1,300, their earned income exceeds $14,600, or their gross income exceeds the larger of $1,300 or their earned income plus $450. Unearned income includes interest, dividends, and taxable scholarships not for educational expenses. Earned income typically comes from wages, salaries, or tips.

Being a dependent impacts both the student’s filing requirement and a parent’s ability to claim certain tax benefits. A student is generally a qualifying child dependent if they are under age 19, or under age 24 and a full-time student, and have not provided more than half of their own support. If they don’t meet qualifying child criteria, they might be a qualifying relative dependent if their gross income is below a threshold and the parent provides over half their support.

Even if a student does not meet mandatory filing thresholds, it is often beneficial to file a tax return. This is especially true if federal income tax was withheld from their paychecks, as filing is the only way to claim a refund for overpayment. Filing also allows students to claim refundable tax credits, such as a portion of the American Opportunity Tax Credit, which can result in a refund even if no tax was owed. For example, a student with withheld taxes who falls below the filing threshold would miss out on a refund unless they file. Filing ensures students can recover overpaid taxes or receive eligible refundable credits.

Information Gathering for Filing

Preparing a tax return requires collecting specific documents detailing a student’s income and qualified expenses. For wages, a student receives Form W-2, Wage and Tax Statement, from their employer. This form reports total wages paid and federal, state, and local taxes withheld. Employers must issue Form W-2 by January 31 following the tax year.

Students performing freelance work or as independent contractors may receive Form 1099-NEC, Nonemployee Compensation, if paid $600 or more by a single payer. Other income sources, like interest from a savings account, are reported on Form 1099-INT if interest earned is $10 or more. Dividends from investments are reported on Form 1099-DIV. Miscellaneous income, such as prizes or awards, might appear on Form 1099-MISC.

For education expenses, Form 1098-T, Tuition Statement, is provided by eligible educational institutions. This form reports amounts paid for qualified tuition and related expenses, plus scholarships and grants received. Students should also keep records of other qualified education expenses not reported on this form, such as books, supplies, or equipment. Records of student loan interest paid are necessary for claiming potential deductions. Personal identification information, including Social Security numbers for the student and any dependents, is essential for accurate tax preparation.

Understanding Education-Related Tax Benefits

Several tax credits and deductions help offset higher education costs, potentially reducing a student’s or their parents’ tax liability. The American Opportunity Tax Credit (AOTC) is available for eligible students during their first four years of post-secondary education. This credit provides up to $2,500 per eligible student, with 40% refundable, meaning a portion can be received as a refund even if no tax is owed. To qualify, the student must pursue a degree or recognized educational credential and be enrolled at least half-time for one academic period in the tax year.

The Lifetime Learning Credit (LLC) also helps with education expenses, offering up to $2,000 per tax return. Unlike the AOTC, the LLC is not limited to the first four years of study. It can be claimed for undergraduate, graduate, or job skill courses, with no degree program or half-time enrollment requirement. However, the LLC is non-refundable, meaning it only reduces tax liability to zero and cannot generate a refund.

Income limitations apply to both credits. For 2024, the AOTC and LLC begin to phase out for single filers with a modified adjusted gross income (MAGI) between $80,000 and $90,000. For married couples filing jointly, the MAGI phase-out is between $160,000 and $180,000. A taxpayer cannot claim both the AOTC and the LLC for the same student in the same tax year.

The student loan interest deduction allows taxpayers to deduct up to $2,500 in student loan interest paid during the year. This deduction reduces taxable income, whether the taxpayer itemizes or takes the standard deduction. Claiming these benefits often depends on who claims the student as a dependent. If a student is claimed as a dependent, the parent typically claims the education credits or deduction. If the student is not a dependent, they can claim the benefits themselves.

Methods for Filing

Once all necessary information and documents are gathered, several methods are available for filing. One approach is using tax software, either online or desktop-based. These programs guide users through preparation, asking questions to ensure all relevant income and deductions are captured. After data entry, the software calculates the tax liability or refund and can electronically submit the return to the IRS.

The IRS Free File program provides eligible taxpayers with access to free tax preparation software. For 2024, individuals with an adjusted gross income (AGI) of $84,000 or less generally qualify. Accessing the Free File program through the IRS website ensures eligibility and proper routing to participating software providers.

For those preferring a traditional method, paper forms can be downloaded from the IRS website, completed manually, and mailed to the appropriate IRS processing center. This method typically has longer processing times than electronic filing. Alternatively, students can hire a professional tax preparer, such as a Certified Public Accountant (CPA) or an enrolled agent. A professional preparer offers personalized advice, ensures accuracy, and files the return on the student’s behalf.

After a return is filed, especially electronically, taxpayers typically receive an email confirmation. The IRS usually processes refunds within a few weeks for electronically filed returns. Taxpayers can track their federal refund status using the “Where’s My Refund?” tool on the IRS website, which provides updates on processing stages.