Maicher CPA Pllc provides tax preparation services to help businesses and individuals of all ages to succeed. Many young people have gone back to school and for many of them it also means working to pay those tuition bills. Despite some common misconceptions, students who generate income have certain tax obligations which need to be addressed.
Students should keep the following pointers in mind:
- Withholding and Filing a Tax Return. If you are an employee, your employer withholds tax from your paychecks. You do not need to file a tax return if your income is less than $12,200.00 but you may still wish to file a return in case you are entitled to a refund because your employer over-withheld.
- Self-Employment. Even if you are not an “employee,” earnings doing work for others is taxable. Record your income and expenses related to your work. You may be able to deduct those costs from your income to reduce your taxes.
- Tax Credits. During the first four years of college, you may be entitled to the “American Opportunity Tax Credit, commonly called the AOTC – provided your parents don’t claim you as a dependent on their tax return. If this $2,500 refundable tax credit brings your taxes owed to zero, you can have up to $1,000 refunded to you. Graduate students may be eligible for even larger tax credits.
- Student Loan Interest. Student loan interest is interest you paid during the year on a qualified student loan. It includes both required and voluntarily pre-paid interest payments. You may deduct the lesser of $2,500 or the amount of interest you actually paid during the year.
Conclusion: Even students have certain tax issues to consider. At Maicher CPA Pllc, our tax professionals have provided effective and ethical tax return preparation services for decades to businesses, individuals – and their families. Contact us today for an appointment.
IRS Publication – “Tax Benefits for Education: Information Center,” (June 5, 2020).
“Tax-Filing Tips for College Students,” US News & World Report (June 4, 2020).
IRS Publication (Topic No. 456) – “Student Loan Interest Deduction,” (May 28, 2020).