Student Tax Myths and Tips
Taxes are a complicated topic, and there are myths out there that are misleading to the average taxpayer, especially one who may be filing their first tax return. Let us debunk 5 common student tax myths for you. We have also provided a collection of essential student tax tips for beginners.
5 Common Student Tax Myths
Taxes can often be a confusing topic, and there are many myths about what can and can't be done. Here we cover the most common student tax myths and explain why they are not true.
Myth #1: I don't have to file a tax return.
As a student or a young person, there are multiple reasons for you to want to file a tax return. You may want to claim any tax credits that you may be eligible for, or get a refund from the income tax that was withheld by your employer at your job in the case that you don't owe any taxes. Learn more about reasons to file a tax return as a student.
Myth #2: I can't deduct my student loan interest because my parents pay it.
Actually, you usually can. If, according to the agreement under which the loan was made, you are the person responsible for paying it out, but your parents made the payment for you, then you can make a deduction for student loan interest if nobody made a dependency exemption for you. Read more in Publication 970 -Tax Benefits for Education under Student Loan Interest Deduction.
Myth #3: I can deduct the expenses of looking for my first job.
Unfortunately, you can't for your first job. There is no doubt that it can be expensive hunting for a job and if you are fresh out of school and looking for your first job, the costs of such things as travel and resume printing can add up quickly. Normally, the IRS will let you deduct job search expenses if you are seeking a new job (in the same line of work you already perform), but unfortunately this does not apply to the expenses of finding your first job.
Myth #4: I can deduct school housing or dormitory charges.
The IRS doesn't allow you to do that. There are housing-related deductions in the tax code, but none of them apply to dorms.
Myth #5: I can deduct moving costs to go to school.
Unfortunately, the IRS does not allow you to do that. Moving expenses and costs can only be deducted when you are looking for a new job and need to relocate. Moving in to a college dorm doesn't apply to that category.
Essential Student Tax Tips for Beginners
If this is your first time filing taxes, it can be stressful and unfamiliar. These tips can help you get started by offering easy to understand tips to successfully completing your first tax return:
- If you’ve had money withheld from your paycheck, make sure to file a tax return even if you make too little money to do so. This will enable you to receive a refund of the money withheld from your paycheck.
- If you are not getting any withholdings for either taxes or Social Security from your paycheck, it is likely that you are registered as a private contractor and will have to pay taxes yourself. That includes the self-employment tax, so make sure to set aside the appropriate amount of money for paying your taxes once tax season comes.
- Make sure the withholdings are correct. Use our free withholding calculator for help!
- Don’t wait until the last minute to file your taxes. Since this might be one of your first times filing taxes, if not the first, make sure you have enough time to acquaint yourself with the process and your particular tax situation.
- Filing the 1040 EZ form efile it automatically implies that you claim yourself as a dependent. If your parents pay for more than 50% of your expenses, then they will claim you as a dependent. You claiming yourself as a dependent and your parents claiming you as well will result in problems with the IRS because of the overlap.
- Filing your paper forms can be a tedious process which would require you to double check all your inputs to avoid any serious errors. A better option is to efile, since much of the error checking is done automatically, greatly reducing the chance of making a serious error. Learn more about benefits of efiling with efile.com, or start a free efile tax return.
- Either you or your parents can deduct up to $4,000 of education expenses from their taxes. That means that the income on which you pay taxes can get reduced by up to $4,000. If you pay for your education, then you can deduct, if your parents pay or your education, then they can deduct.
- The definition of residency can vary from state to state, and you will have to pay taxes to each state that you are a resident of. If you live in one state but attend college in another, make sure to check the residency requirements.
- Remember that work study programs are taxable, even if you just get a tuition break instead of a paycheck. Therefore, make sure you have the money you might owe to the IRS at the end of the year. Use our free tax calculator for an estimate!
- If you have student loans, you can deduct up to $2,500 of interest on your student loans that you use to pay for school. Learn more about deducting student loan interest.
- Student loans are not taxable because they are not considered income. However, forgiven student debt is taxable.
- If you have a job that pays in tips, make sure to include that into your income, since that is considered taxable income.
- Any other odd jobs that are paid by in cash are also considered taxable income.
- Unlike scholarships that go toward paying tuition, scholarships that go toward paying room and board are not tax-exempt, so make sure to count that as your income.
- ROTC subsistence allowances for those who are in training are tax-exempt. Active duty pay, however, is taxable income. Things like pay received during advanced camp during the summer would fall under the category of active duty pay.
- If you are a newspaper distributor and under 18, you are generally exempt from the self-employment tax.
- If you received any income on your investments, including interest earned from a savings account or a CD at a bank, you must report that as income.
- If you are a graduate student, there might be some tax breaks for you just like there are for undergraduate students.
Want to save some money? Read about money saving tips for college students as well as many other savings tips for any occasion or situation.
Find student tax information including an overview of student tax breaks.
Use our free tax tools to calculate taxes or determine eligibility for certain tax credits.