Tax tips to know for college students and parents

There are a lot of issues college students and their parents ought to take note earlier than submitting their taxes, and whereas tax execs say it’s nice for college students to begin submitting their very own types, parents and students ought to double examine the whole lot fastidiously earlier than anybody pushes the “submit” button.

Be clear on who’s a dependent

For dependent students submitting taxes for the primary time, it’s straightforward to overlook checking the “dependent” field, and they can’t then be claimed on their parents’ tax types with out the lengthy and arduous activity of amending the return merely for failure to examine a field.

“College students need to be very careful that they understand whether or not their parents are eligible to claim them as a dependent,” says Tom O’Saben, director of tax content material and authorities relations on the American Association of Tax Professionals. Merely not claiming a dependent doesn’t make that taxpayer unbiased, he says.

IRS SAYS 940,000 PEOPLE HAVE NOT CLAIMED EXPIRING 2020 TAX REFUNDS TOTALING OVER $1B

Claim all eligible college and different training tax credit

There are two sorts of training tax credit. The American alternative credit score is for up to $2,500 a 12 months (primarily based on not less than $4,000 spent on tuition, books and charges) for the primary 4 years towards an undergraduate diploma.

The second, a lifetime studying credit score, can be utilized towards an undergraduate, graduate or skilled diploma and is for up to $2,000 (primarily based on 20% of certified training bills.) A mum or dad can’t declare each for the identical dependent youngster (or a scholar can declare it) on a return for the identical 12 months, but when there are a number of dependents on the return they might be utilizing both of the credit (however not each on the identical time) for every scholar.

Students cross the campus of Dartmouth College on March 5, 2024, in Hanover, New Hampshire. When college students and parents are submitting tax types, they need to be sure that to double-check that every one data is right earlier than sending it in. (AP Photo/Robert F. Bukaty, File)

Double examine that every one types are in hand

While most tax-related types arrive dependably within the mail, college students have a tendency to work a number of jobs annually, and some college tax types may have to be printed out from the college portal and are usually not mailed in any respect. So earlier than submitting, be sure that your dependent scholar has confirmed that every one tax types are in for all jobs labored, and they’ve checked with the college for any further tax types.

Be clear about state residency

If a scholar is paying not less than half of their very own prices and is planning on claiming in-state tuition at their college in a state apart from the one during which their parents reside, they could need to examine with the college monetary support workplace about residency necessities, O’Saben says.

In some instances, claiming your youngster as a dependent won’t be the perfect transfer as soon as the whole monetary image is taken under consideration.

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“Just providing an address in the state your child’s college is in may not be enough to claim in-state tuition,” O’Saben says.

Make positive your college scholar recordsdata, if wanted

Sometimes college students are nonetheless required to file their very own return even when their parents declare them. Students and parents ought to examine the principles for dependent submitting and decide if the coed is required to file their very own return primarily based on their gross revenue, says Kathy Pickering, chief tax officer at H&R Block.

Make essentially the most of your 529 account

Qualifying distributions from a 529 account are tax-free and are usually not included within the youngster’s revenue, Pickering stated. And whereas solely eligible tuition, charges and books are included within the tax credit score calculations, for 529 accounts, room and board are additionally included as eligible for withdrawals.