What college students should know about taxes and deductions
Bana Schneider and Samantha Stauber
Issue date: 2/1/07 Section: Features
With the end of January arising, many of us will be receiving tax statements called W-2's or 1099's. The two tax statements give you information as to how much money you made throughout the year, as well as how much money was deducted from your gross earnings.
With these forms coming in the mail, it is not too late to think about tax preparation and what tax laws affect you as a college student. Many college students are claimed as a dependent by their parents, meaning that your parents can take deductions pertaining to you.
One deduction that involves college students are the education credits. There are two credits: the HOPE Credit and the Lifetime Learning Credit. These credits are for qualified tuition and related expenses for college. The HOPE Credit permits a maximum credit of $1,500 a year for the first two years of college. The Lifetime Learning Credit is 20% of qualified tuition and expenses up to $10,000 a year and it is usually taken after the HOPE credit. The credits have phase outs that are related to adjusted gross income, which your tax preparer discusses with you when you ask about taking one of the two education credits available to you. If your parents claim you as a dependent they can take these credits on your behalf reducing their tax liability (the amount of taxes they owe). If you do not know how much tuition you have paid this year and did not receive a Form 1098 in the mail, you should contact Deb Buffington, who is the person in charge of this issue at Lakeland College.
Another credit pertaining to college students is the interest on student loans which was paid throughout the tax year. Loans are a dreadful part of college life, but the IRS is finding a way to give back to the poor college kid. Your loan provider will provide you with a statement regarding how much interest you have paid for the year. This statement has a piece of information that needs to be given to your tax preparer. The student loan credit is a before-the-line deduction, meaning the deduction reduces your income before tax liability is calculated. Your parents can also benefit from this if they claim you as a dependent or if they have taken out a student loan on your behalf, such as a Parent Plus Loan.
With these forms coming in the mail, it is not too late to think about tax preparation and what tax laws affect you as a college student. Many college students are claimed as a dependent by their parents, meaning that your parents can take deductions pertaining to you.
One deduction that involves college students are the education credits. There are two credits: the HOPE Credit and the Lifetime Learning Credit. These credits are for qualified tuition and related expenses for college. The HOPE Credit permits a maximum credit of $1,500 a year for the first two years of college. The Lifetime Learning Credit is 20% of qualified tuition and expenses up to $10,000 a year and it is usually taken after the HOPE credit. The credits have phase outs that are related to adjusted gross income, which your tax preparer discusses with you when you ask about taking one of the two education credits available to you. If your parents claim you as a dependent they can take these credits on your behalf reducing their tax liability (the amount of taxes they owe). If you do not know how much tuition you have paid this year and did not receive a Form 1098 in the mail, you should contact Deb Buffington, who is the person in charge of this issue at Lakeland College.
Another credit pertaining to college students is the interest on student loans which was paid throughout the tax year. Loans are a dreadful part of college life, but the IRS is finding a way to give back to the poor college kid. Your loan provider will provide you with a statement regarding how much interest you have paid for the year. This statement has a piece of information that needs to be given to your tax preparer. The student loan credit is a before-the-line deduction, meaning the deduction reduces your income before tax liability is calculated. Your parents can also benefit from this if they claim you as a dependent or if they have taken out a student loan on your behalf, such as a Parent Plus Loan.
Be the first to comment on this story