“There are a lot of things that college students and their parents should consider before filing their taxes, and while tax professionals say it's great for college students to start filing their own forms, parents and students should double-check everything carefully before anyone pays.” Submit button.
Be clear about who is dependent
For dependent students filing taxes for the first time, it's easy to overlook checking the “dependent” box — and if they don't, they can't be claimed on their parents' tax forms without the long and arduous task of amending the return just for failing to check the box.
“College students need to be very careful to understand whether or not their parents are eligible to claim them as dependents,” says Tom Osapin, director of tax content and government relations at the American Assn. Tax specialists. He says that simply not claiming a dependent does not make a taxpayer independent.
Claim all college tax credits and other eligible educational tax credits
There are two types of education tax credits. The American Opportunity Credit is up to $2,500 per year (based on spending at least $4,000 on tuition, books, and fees) for the first four years of an undergraduate degree.
The second, the Lifelong Learning Credit, can be used toward an undergraduate, graduate, or professional degree and is up to $2,000 (based on 20% of eligible education expenses).
A parent cannot claim both credits for the same dependent child when returning in the same year; Neither can the student who files. If there are multiple dependents when a parent returns, both credits can be used as long as only one is claimed for each student.
Double check that all forms are in hand
While most tax-related forms arrive reliably in the mail, college students often work multiple jobs each year, and some college tax forms may need to be printed from the school portal and not mailed at all. Therefore, before applying, make sure that the dependent student has confirmed that all tax forms are in place for all positions worked, and that he or she has checked with the college for any additional tax forms.
Be clear about statehood
If a student is paying at least half of his or her own costs and plans to claim in-state tuition at a college in a state other than the one where his or her parents live, he or she may want to check with the college financial aid office about residency requirements, Osapin says.
In some cases, claiming your child as a dependent may not be the best move once the entire financial picture is taken into account.
“Simply providing an address in the state where your child attends college may not be enough to claim in-state tuition,” Osabin says.
Verify the student's university files, if necessary
College students are sometimes required to file their own returns even if their parents require them. Students and parents should check the rules for filing dependent returns and determine whether a student is required to file his or her own return based on his or her gross income, says Cathy Pickering, chief tax officer at H&R Block.
Make the most of your 529 account
Qualified distributions from a 529 account are tax deductible and are not included in the child's income, Pickering said. And while only eligible tuition, fees and books are included in the tax credit calculations, for 529 accounts, room and board are also included as eligible for withdrawal.
Roth writes for the Associated Press.
