Just because you are a fulltime student doesn’t mean you are automatically exempt from filing a tax return or reporting your income. If you didn’t have enough withheld during the year, you may owe a surprising amount of taxes. If you don’t have to file a return, you still should, as you may be entitled to a refund of taxes you may have overpaid. There’s a possibility that you can qualify for the Earned Income Credit as well, which is refundable even if you didn’t pay taxes.
Most likely, you’ve had to get a summer job or a part-time job to help with school expenses. Any income you made, including wages and tips, is taxable according to the Federal Tax Code. Your employer will provide you with a Form W-2, which will list your wages, salaries, and commissions, as well as tax withholdings, Social Security, and Medicare withholdings. If you work on your own mowing lawns on the weekend or the like, you are considered self-employed and will need to report the income made from these activities.
If you are paying for your education using a distribution from a qualified education program, you will receive a Form 1099-Q, Payments from Qualified Education Programs. Certain withdrawal earnings from Coverdell ESA accounts or other qualified tuition programs aren’t taxed when used for higher education purposes.
Scholarships, fellowships or Fulbright grant income is eligible for exclusion from your income on your tax return. This applies to money used from these programs for different expenses such as enrollment fees, books, supplies, and required equipment to pursue your degree. However, research travel costs, clerical, or room and board are not able to be excluded. If you are not seeking a degree, the full amount of received awards is taxable. You will receive an additional W-2 which reports the scholarship amount subject to taxation. Pell Grants and Supplemental Education Opportunity grants are also not taxable provided they are used for tuition and expenses.
Certain qualified expenses, such as tuition, can be used to reduce your tax liability, as long as they weren’t paid for using money that was not subject to taxes. Also you should check your eligibility for certain education credits, including the Lifetime Learning Credit and the American Opportunity Credit. If you pay tuition, you will receive a Form 1098-T which will record the full amount of tuition payments you made.
After graduation, you may be eligible for additional deductions including student loan interest payments and relocation expenses. Student loan holders who are actively making payments can deduct up to $2,500 of interest on their loans, which will be reported on Form 1098-E, Student Loan Interest Statement.
Certain moving expenses, incurred due to relocation for a new job, can be deducted provided they were not reimbursed by your new employer. You can generally deduct expenses such as:
- Transit and storage expenses for relocation of your personal effects
- Travel costs, including overnight lodging. If you use your own car, you can either deduct the standard mileage rate or your actual expenses, such as gas.
- Parking fees and tolls
You can’t deduct general maintenance, repairs, or insurance costs. It’s important to keep all receipts to back up any deductions you take.