Tax tips for college students, their parents
Filing can be more complicated for young adults in school and their families. Experts clarify the process.
NEW YORK — There are lots of things college students and their parents should keep in mind before filing their taxes, and while tax pros say it’s great for students to start filing their own forms, parents and students should doublecheck everything carefully before anyone pushes the “submit” button.
Be clear who is still a 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 merely for failure to check a box.
“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 and government relations at the American Assn. of Tax Professionals. Merely not claiming a dependent does not make that taxpayer independent, he says.
Claim the correct education credits
There are two kinds of education tax credits. The American Opportunity Credit is up to $2,500 a year (based on at least $4,000 in
tuition, fees and books) for the first four years toward an undergraduate degree.
The second, the Lifetime Learning Credit, can be used toward an undergraduate, graduate or professional degree and is for up to $2,000 (based on 20% of qualifying education expenses).
A parent cannot claim both credits for the same dependent child on a return in the same year; nor can a student who files. If there
are multiple dependents on a parent’s return, both credits may be used so long as just one is claimed for each student.
Make sure college forms are on hand
While most tax-related forms arrive dependably in the mail, college students often work multiple jobs each year, and some college tax forms may need to be
printed from the school’s portal and are not mailed at all. So before filing, make sure your dependent student has confirmed that all tax forms are in for all jobs worked, and that they’ve checked with the college for any additional tax forms.
Determine student’s state of residency
If a student is paying at least half of their own costs
and is planning on claiming in-state tuition at a college in a state other than the one where their parents live, they might want to check with the college financial aid office about residency requirements, O’Saben says.
In some cases, claiming your child as a dependent might not be the best move once the entire financial picture is considered.
“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.
Check whether student must f ile
Sometimes college students must file their own returns even if their parents claim them as dependents. Families should check the rules for dependent filing and determine whether the student is required to file a return based on their gross income, says Kathy Pickering, chief tax officer at H&R Block.
Make the most of your 529 account
Qualifying distributions from a 529 account are tax-free 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 withdrawals.