A College Student’s Guide To Filing Taxes

College students can face many challenges—including filing taxes. From figuring out who is a dependent to whether you have to report scholarships, getting through a tax return can feel like the equivalent of cramming for a final exam. But there's no need to pull an all-nighter—here's what you need to know.

You may not need to file.

First-time filers sometimes fall into the trap of believing that only full-time, permanent employees have to file and pay taxes. That's not true. You may be required to file as a part-time or seasonal employee or an independent contractor—that extra money you’re making as a bartender or delivery person may mean that you need to file.

But, not everyone needs to file a tax return. Whether you need to file a tax return depends on your filing status, age, and gross income. You can figure that out using this chart:

For purposes of the chart, gross income means all income you receive in the form of money, goods, property, and services not otherwise exempt from tax. When figuring gross income, don't include Social Security benefits unless you are married filing separately and lived with your spouse at any time in 2023, or if one-half of your Social Security benefits plus your other gross income and any tax-exempt interest is more than $25,000 ($32,000 if married filing jointly).

Even if you don't have to file, you may want to file a tax return to get a refund of any federal income tax withheld. You should also file if you are eligible for any of the following credits:

• Earned Income Tax Credit (EITC). Most traditional college students won’t be eligible to claim this credit since you have to be at least age 25 or have children, but if you’re an older student or a parent, check to see if you qualify.
• American Opportunity Credit (AOC). More on this below... keep reading!
• Premium Tax Credit. You may qualify if no one claims you as a dependent and you have health insurance purchased through the Health Insurance Marketplace.

Talk to your parents.

College students may not know whether they should file as independent or if their parents plan to claim them on their return.

These rules generally apply to dependents :

• A dependent must be a U.S. citizen, resident alien or national, or a resident of Canada or Mexico.
• A person can't be claimed as a dependent on more than one tax return (some exceptions exist)
• A dependent can't claim a dependent on their own tax return
• You can't claim your spouse as a dependent if you file jointly
• A dependent must be a qualifying child or a qualifying relative of the taxpayer (your spouse is never your dependent).

That said, while a clear definition is available, your parents may assume they are supporting you. I always recommend asking your parents what the plan is before you file your tax return. Remember that you can still file a tax return if your parents claim you as a dependent, but in that case, you cannot claim yourself—no double dipping.

Scholarships and grants may be tax-free.

A scholarship or grant can be a great way to pay for college, and many are tax-free if you meet certain requirements.

Scholarships (including athletic scholarships) and grants are tax-free if the following apply:

• You're a candidate for a degree at an educational institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities; and
• The amounts you receive are used to pay for tuition and fees required for enrollment or attendance at the educational institution, or for fees, books, supplies, and equipment required for courses at the educational institution.

Scholarships and grants that may be subject to tax include:

• Amounts used for incidental expenses, such as room and board, travel, and optional equipment.

• Amounts received as payments for teaching, research, or other services required as a condition for receiving the scholarship or fellowship grant. (Exceptions apply, including awards through the National Health Service Corps Scholarship Program, the Armed Forces Health Professions Scholarship and Financial Assistance Program, or a comprehensive student work-learning-service program operated by a work college. If you're not sure, ask.)

Yes, that means you could have a scholarship or grant in which part is tax-free, and part is taxable. If you exclude any part of a scholarship or grant, be sure to keep excellent records to support your position.

You'll report any portion of a taxable scholarship or grant reported on a Form W-2 on Line 1a of Form 1040. If the taxable amount wasn't reported on Form W-2, enter the amount on Line 8.

Don't forget about education credits .

For the tax year 2023, two kinds of education tax credits are available: the American Opportunity Credit and the Lifetime Learning Credit. Credits are great because they reduce the tax payable (as opposed to deductions, which simply reduce your taxable income).

Generally, you can claim the American Opportunity Credit or the Lifetime Learning Credit if all three of the following requirements apply:

• You pay qualified education expenses of higher education;
• You pay the education expenses for an eligible student; and
• The eligible student is you, your spouse, or a dependent you claim on your tax return.

Importantly, for purposes of the credit, qualified education expenses paid by a dependent you claim on your tax return, or by a third party for that dependent, are considered paid by you.

The American Opportunity Credit is worth up to $2,500 towards eligible expenses for each student who qualifies, but you can only claim the credit for up to four tax years per student (you must be pursuing a degree or other recognized credential). A whopping 40% of the American Opportunity Credit may be refundable—that means that if your credit is more than your tax, the excess will be refunded to you. Note that income limitations apply—for 2023, your modified adjusted gross income (MAGI) can't exceed $90,000 ($180,000 or more if married filing jointly).

The Lifetime Learning Credit is worth up to $2,000 per year. There is no limit on the number of years the credit can be claimed for each student. Income limitations apply here, too. For 2023, the amount of your lifetime learning credit is phased out if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return).

Again, no double-dipping. You can only claim one education credit per student in the same year.

Don't forget about your 529 account.

Qualifying distributions from a 529 account are tax-free. Unlike those education tax credits, qualified education expenses include room and board. They also include student loan repayments (up to a $10,000 lifetime limit per student).

Benefit from the student loan interest deduction.

There’s a lot of chatter about student loans. But if you meet certain criteria, you may be able to offset some of the pain of repayment with a tax deduction.

For 2023, the amount of your student loan interest deduction begins to phase out if your MAGI is between $75,000 and $90,000 ($155,000 and $185,000 if you file a joint return)—that means that the amount of the credit decreases as your income increases. You can't claim the deduction if your MAGI is $90,000 or more ($185,000 or more if you file a joint return).

Your student loan does not have to come from PHEAA or another institutional student loan provider to be deductible. You can include other debt, such as credit cards, bank loans, or a line of credit, if you use those loans only to pay qualified education expenses— do not commingle expenses. Borrowed funds cannot be from a related person or made under a qualified employer plan.

The best part? If someone else makes a student loan payment on your behalf, the payment can be treated for federal income tax reasons as though you made the payment. For example, if your mom and dad pay some of your loans, you can still claim the interest for purposes of the deduction. But be careful: If your parent claims you as a dependent, but you are legally obligated to pay the loan, then neither one of you can take the deduction.

You may be able to exclude income under the education savings bond program.

Generally, you must pay tax on the interest earned on U.S. savings bonds. But when you cash in certain savings bonds under an education savings bond program, you may be able to exclude the interest from income if the following apply:

• You pay qualified education expenses for you, your spouse, or a dependent.
• Your MAGI is less than $106,850 ($167,800 if married filing jointly).
• Your filing status isn't married filing separately.

To qualify, the U.S. savings bond must be a series EE bond issued after 1989 or a series I bond issued in your own name or in the name of you and your spouse as co-owners. You must also be at least 24 years old before the bond's issue date.

For 2023, the amount of your education savings bond interest exclusion is gradually phased out if your MAGI is between $91,850 and $106,850 ($137,800 and $167,800 if you file a joint return). You can't exclude any interest if your MAGI is $106,850 or more ($167,800 or more if you file a joint return).

Education exception to additional tax on early IRA distributions.

Generally, if you take a distribution from your IRA before age 59-1/2, you must pay a 10% additional tax on the early distribution. This applies to any IRA you own, including a Roth IRA.

An exception applies to distributions from an IRA used to pay qualified higher education expenses for yourself, your spouse, your or your spouse's child, foster child, adopted child, or your or your spouse's grandchild. The amount distributed may still be subject to tax—you'll just avoid the additional tax.

Know your due dates.

Tax Day is April 15, 2024, for most taxpayers. Taxpayers in Maine or Massachusetts have until April 17, 2024, due to the Patriot's Day and Emancipation Day holidays. Taxpayers living in a federally declared disaster area may also have additional time to file.

If you can't file on time, you can request an extension .

Help is available.

These are just the highlights—some additional rules and restrictions may apply (this is tax, after all).

I highly recommend using a tax professional to help you navigate some tricky parts. Be smart when you hire—rely on referrals and ask lots of questions. Remember that your tax preparer should have a PTIN (Preparer Tax Identification Number). Ask in advance, or check out PTIN qualifications on your own by using the IRS online PTIN directory .

The IRS also offers free basic tax return preparation to qualified individuals through their Volunteer Income Tax Assistance (VITA) program. VITA sites offer free tax help to people who need assistance preparing their tax returns, including those who generally make $64,000 or less. You can find a VITA center near you here .

You might also consider using tax preparation software. Most programs have an interview-like format that walks you through the basics and then does the calculation for you. If you qualify, you can use free software through IRS Free File . Typically, taxpayers with an adjusted gross income (AGI) of $79,000 or less in 2023 will qualify—click over to IRS.gov/freefile to see the options.

And don’t forget to check out our free Forbes Tax Guide .

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