Tax Tips for College Students and Recent Graduates

1. Understand Your Filing Status

Overview:Your filing status affects the tax rate and the standard deduction you can claim. Most students and recent graduates will file as "Single," but different situations may warrant a different status.

Practical Tips:

• Review your dependency status; if your parents claim you as a dependent, some deductions and credits may not be available to you.
• Use IRS’s Interactive Tax Assistant tool to determine the right status for you.

Qualification:

• You can be considered a dependent if you are under 24, a full-time student, and financially supported by your parents for more than half the year.

2. Education Credits and Deductions

Overview:Two main credits are available: the American Opportunity Credit (AOC) and the Lifetime Learning Credit (LLC).

Practical Tips:

• Keep track of your tuition fees and required educational materials to claim these credits.
• You cannot claim both credits for the same student in one year.

Qualification:

• AOC is available for the first four years of higher education with a maximum benefit of $2,500 per eligible student per year if your modified adjusted gross income (MAGI) is $80,000 or less ($160,000 or less for married filing jointly).
• LLC allows up to $2,000 per tax return, not per student, and has no limit on the number of years you can claim it. MAGI must be under $69,000 ($138,000 if filing jointly).

3. Student Loan Interest Deduction

Overview:You can deduct up to $2,500 of the interest paid on your student loans annually.

Practical Tips:

• Ensure that you receive Form 1098-E from your loan servicer to claim this deduction.

Qualification:

• You are eligible if your MAGI is less than $85,000 ($170,000 if filing a joint return).

4. Earned Income Tax Credit (EITC)

Overview:EITC is a benefit for working people with low to moderate income, including working students.

Practical Tips:

• File a tax return even if you don’t owe any tax or are not required to file to claim the EITC.

Qualification:

• Your earned income and adjusted gross income (AGI) must each be less than $15,980 ($21,920 for married filing jointly) if you do not have qualifying children.

5. Job-Related Deductions

Overview:If you have started working, you might be able to deduct certain job-related expenses, including costs for uniforms, travel, and continuing education.

Practical Tips:

• Keep detailed records of all work-related expenses.

Qualification:

• These deductions are generally available if they are required by your employer and not reimbursed.

Conclusion

Understanding and taking advantage of the tax benefits available can significantly impact your finances. This guide serves as a starting point to make educated decisions about your taxes.

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Legal Disclaimer: This guide is provided for informational purposes only and should not be construed as tax advice. Tax laws and regulations are subject to change, and individual circumstances may vary. Consult with a qualified tax professional or advisor to address your specific tax situation and compliance requirements.

To schedule your consultation, please use my Calendly link.

Best Regards,

Askia Roberts, CPA

RTW Advisors

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