Tax tips for college students and their parents
NEW YORK — There are many things students and their parents need to consider before filing their taxes, and while tax professionals say it’s great for students to start filing their own forms, parents and students should check everything carefully before anyone hits “file.” ” knob.
For dependent students filing taxes for the first time, it’s easy to miss the “dependent” box, and they can’t be claimed on their parents’ tax forms without the long and arduous task of filing. pass just because they left a box unchecked. .
“Students should take great care to understand whether or not their parents are eligible to claim them as a dependent,” says Tom O’Saben, director of tax content and government relations at the American Association of Tax Professionals. Merely not claiming a dependent does not make that taxpayer independent, he says.
There are two types of education tax credits. The U.S. Opportunity Credit is up to $2,500 per year (based on at least $4,000 spent on tuition, books, and fees) for the first four years toward a bachelor’s degree.
The second, a Lifetime Learning Credit, can be used toward a bachelor’s, master’s, or professional degree and is up to $2,000 (based on 20% of qualified education expenses). A parent cannot claim both for the same dependent child (or a student can claim it) on a return for the same year, but if there are multiple dependents on the return they can use one of the credits for each student ( but not both at the same time).
Although most tax-related forms arrive reliably by mail, students tend to work multiple jobs each year, and some college tax forms may need to be printed through the college portal and are not mailed at all. So before filing, make sure your dependent student has confirmed that all tax forms have been filed for all jobs worked, and that he or she has checked with the college for any additional tax forms.
If a student pays at least half of his own costs and plans to claim tuition at his college in a state other than the one where his parents live, he may want to check with the college’s financial aid office about his residency. requirements, says O’Saben.
In some cases, claiming your child as a dependent may not be the best move when the entire financial picture is considered.
“Providing an address in the state where your child is studying may not be enough to claim tuition assistance,” says O’Saben.
Sometimes students still have to file their own return even if their parents claim it. Students and parents should check the dependent filing rules and determine whether the student must file their own return based on their gross income, says Kathy Pickering, chief tax officer at H.&R block.
Qualifying distributions from a 529 account are tax-free and are not included in the child’s income, Pickering said. And while only eligible tuition, fees and books are included in the tax credit calculations, 529 accounts also include room and board as eligible for withdrawals.
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Find more information about AP’s tax season coverage here: https://apnews.com/hub/personal-finance