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Filing Taxes as a College Student

Do college students have to file taxes?

In general, it is a good idea for college students who work to file their taxes. Filing taxes gives students and recent graduates access to education-related credits and a deduction. These benefits can earn you a higher tax return. The IRS does not automatically issue tax returns, so if you were hoping to receive one, you must file. Additionally, students or the person who claims them as a dependent must file their taxes if they’ve earned money in order to complete the annual FAFSA.

See also: FAFSA 101 guide

That being said, there are a few cases where college students don’t have to file their taxes. The requirements depend on whether the student is claimed as a dependent or is filing independently.

Independent students are not required to file taxes if they:

  • Are under 65 years old
  • Are single
  • Did not work or earned less than the standard deduction for a single taxpayer ($12,550 in 2021)
  • Don’t have special circumstances that require them to file (such as self-employment income)

Dependent students are not required to file taxes if they:

  • Are under 65 years old
  • Are single
  • Did not work or earned less than the standard deduction for single dependents ($1,100 in 2021)

There is no penalty for filing taxes when you aren’t required to. However, there can be penalties if you were required to file and did not. Even if you don’t make enough that you’re required to file, you should do if federal taxes were taken out of your check as they’ll be refunded to you.

Tax benefits for college students

College students and those who are paying student loans can claim a few different credits and a deduction.

The two IRS education credits are the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). These credits help offset the cost of higher education by reducing the amount of tax owed. There are individual requirements for each credit, but both share these three requirements:

Here is more information on each education credit. Keep in mind that a student – or the person claiming a dependent student – cannot use both credits in one year.

American Opportunity Tax Credit

The AOTC is a credit that can be used on qualified education expenses during a student’s first 4 years of higher education. The maximum annual amount for the AOTC is $2,500. If the credit brings the tax owed to $0, the student can have 40% of the amount of the remaining credit refunded to them (up to $1,000). 

In addition to the 3 requirements listed above, an eligible student must:

  • Be enrolled at least half time for at least one academic period beginning during the tax year
  • Not have completed the first 4 years of higher education at the beginning of the tax year
  • Have not claimed the AOTC for more than 4 tax years
  • Not have a felony drug conviction at the end of the tax year
  • Receive a 1098-T form from their institution (more on this form below)

Lifetime Learning Credit

The LLC can be used to help pay for undergraduate, graduate, and professional degree courses. This includes courses taken to learn or improve job skills. There is no limit to how many years a student can claim the LLC. The annual maximum amount is $2,000. Unlike the AOTC, the LLC is non-refundable. This means you can use the credit to pay any tax owed, but remaining credit will not be refunded to you.

In addition to the 3 requirements listed above, an eligible student must:

  • Be taking a higher education course or courses to get a degree or other recognized education credential or to learn/improve job skills.
  • Be enrolled for at least one academic period beginning in the tax year.

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In addition to the AOTC and the LLC, there is a Student Loan Interest Deduction. Deductions allow people to reduce their income before calculating the amount of tax they owe.

Student Loan Interest Deduction

This deduction is for students or former students who are paying off student loans. If the student’s modified adjusted gross income is less than $80,000, they can take the Student Loan Interest Deduction. The maximum annual student loan interest deduction is $2,500. The deduction can be used on the interest paid on a student loan for yourself, your spouse, or your dependent. 

See also: Top alternatives to four-year universities

Needed information and forms

To file taxes and claim any of the above benefits, students need a few forms in addition to their W2 or 1099. 

First, students need their 1098-T Tuition Statement. This form reports the expenses and tuition paid for higher education. Students receive this form from their institution, usually by January 31. To take a Student Loan Interest Deduction, you must have your 1098-E Student Loan Interest Statement. Anyone who paid at least $600 to a loan servicer will receive a 1098-E. If you have multiple servicers, you’ll receive a form from each. Keep in mind that, because of the student loan pause due to COVID-19, many students have not paid interest and will not receive a 1098-E from their federal servicer in 2022. Form 8863 is the form used to claim the AOTC or LLC. Students must complete this form and attach it to their tax return.

How to file your taxes

Filing taxes can be complicated, especially for a busy college student. Fortunately, most college students and recent graduates will file a simple tax return. These returns can be filed easily and for little cost (or free)! Students have a few options for actually filing their taxes.

The IRS Free File Form allows people to electronically submit their tax return to the IRS for free. The user must prepare the return themselves. Those whose adjusted gross income is $73,000 or less have access to Guided Tax Preparation. This program provides free tax preparation through the IRS and its partners.

In addition to filing directly through the IRS, students and graduates can use commercial tax preparation services. These companies provide self-service federal tax filing for free. Note that some may require payment for filing state taxes. Some examples are: 

File before the deadline!

If a student is required to file their taxes, be sure to do so before the annual deadline. In 2022, the deadline is April 18. In general, it is on or around April 15. There can be consequences for not filing on time if you are required. If the student held a job during the tax year Even if they didn’t earn enough to require doing so, students should file their taxes to earn a tax return, claim education-related tax benefits.