Student Tax Guide | Affordable College Online

Filing taxes for the first time marks a rite of passage. Taxes for college students can seem intimidating at first, but the task's simplicity may surprise you. Most filers only need a Form 1040, which includes less than two pages.

The Internal Revenue Service (IRS) posts a tool online to help individuals discern whether they must file or not. If your employer withholds state and federal taxes from your paycheck, you could qualify for a refund.

In this student tax guide, we discuss documents needed for filing, how to take advantage of tax benefits, and how to do taxes as a student.

What Do I Need to File My Taxes?

Do not wait to gather the required documents the day before the tax deadline or your tax appointment. While tax filing does not require many hard-to-find documents, tracking them down may take effort.

It helps to begin by gathering basic information, such as your Social Security number. You also need employment information, which comes in the form of W-2 and 1099 forms. Employers must mail or hand-deliver these forms to you. Independent contractors, like freelancers, receive 1099 forms, while employees receive W-2 forms. The government only requires a company to provide a 1099 to contractors who earned more than $600 during the tax year.

You may also want to have a 1098-T and a 1098-E when filing. The 1098-T lists tuition costs, which may provide a deduction. The 1098-E shows student loan interest. Your college provides the 1098-T, and your lender provides the 1098-E.

Most of these forms arrive by mail, so request a mail transfer if you moved within the last year. Check out our glossary of tax terms for a review.

What Do I Need to File on the FAFSA?

Completing the FAFSAand filing taxes are two separate topics, but they overlap in many ways. For starters, students need their tax documents to complete the FAFSA. The application requires your Social Security number, federal income tax returns, and bank statements or investment records if applicable. Students who file their taxes under a dependent status must also provide this information for their guardians.

The FAFSA takes about 45-50 minutes to complete. The federal and state governments use this information to offer need-based grants, work-study opportunities, and subsidized loans. Subsidized loans do not begin accruing interest until six months after the student graduates or withdraws enrollment. Read our guide on completing the FAFSA for more help.

What Tax Benefits Are Available to Students?

1. American Opportunity Credit

   This tax credit may reduce the amount you owe in taxes by $2,500. Students may qualify for this credit during their first four years of college, which covers certain education expenses. If your education expenses do not total $2,500, you may earn a refund of up to $1,000.

   To qualify, applicants must maintain at least part-time enrollment and possess no felonies or drug convictions. The recipient's gross household income cannot exceed $80,000 to receive the full amount. Learners may combine this credit with other credits but may only qualify for this credit four times.

2. Lifetime Learning Credit

   The Lifetime Learning Credit provides a tax reduction of $2,000 for both graduate and undergraduate students. The IRS places income limits on qualifying for the full amount. For example, learners with a gross household income of more than $69,000, or $138,000 if filing jointly, do not qualify. Individuals with a gross household income of $59,000 or less qualify for the full amount.

   Unlike the American Opportunity Credit, individuals do not receive any of this credit back as a refund. Individuals must attend an eligible institution to qualify.

3. Student Loan Interest Deduction 1098-E

   If you use unsubsidized loans to pay for school, the interest you paid in the past year may provide a deduction. This deduction varies from the previous tax benefits for students mentioned.

   While a credit directly reduces the taxes owed in a dollar-for-dollar format, tax deductions for students reduce the amount of taxable income. Your loan issuer should mail Form 1098-E. Be mindful not to confuse this form with the 1098-T from your educational institution, which lists education expenses. This deduction does not count the interest accrued, but only the interest paid. The IRS also places income restrictions on this deduction.

Where Can I Get Help Doing My Taxes?

Many learners wonder how to do taxes as a student. When you first start filing taxes, consider seeking outside help. While you can pay a certified public accountant a small fee to do your taxes, most communities offer free tax filing options.

Check with your college campus to learn about assistance through a student financial services office. This office may also provide a student tax guide on how to file taxes yourself. Some schools that offer accounting degrees allow their accounting students to offer free tax filing services, and a professional reviews the tax documents before submission.

The IRS also facilitates a Volunteer Income Tax Assistance (VITA) program. Individuals who earn less than $57,000 per year, identify as limited-English speaking, or possess a disability can receive help filing their taxes for free. The IRS provides a VITA site navigator tool for your convenience. Additionally, public libraries or local nonprofits might know of upcoming tax-preparation events.

Do I Need to Pay for a Tax Service?

You can take advantage of free tax filing services or pay a professional to complete your taxes. Sometimes, certified public accountants know of additional tax credits and deductions. The amount these professionals help you save may equate to more than the fee. For example, if you primarily freelance and work as a 1099 independent contractor, a certified public accountant can help you itemize your deductions on business expenses like gas and supplies.

If you work primarily as a W-2 employee, your tax situation is likely straightforward and you may not benefit from a paid tax service. Always thoroughly research programs that claim to offer free tax filing services. Many of these popular sites charge hidden fees to submit the information to the IRS. Two free and reliable tax filing services include My Free Taxes and the IRS Free File. Keep in mind that the IRS Free File may charge a fee for state taxes depending on your income.

Overall, filing taxes becomes easier year after year. Always keep your tax records for the previous three years in case of an audit and complete the information to your best ability. Follow the advice in this student tax guide, and you should not experience any issues.