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10 Tax Tips for Students

        Money | Taxes

Students have a few things to keep in mind at tax time.
Students have a few things to keep in mind at tax time.

What could be more carefree than being a student? You eat leftover pizza for breakfast, you do your laundry once a month and you occasionally show up in class when the cost-benefit analysis of grades versus effort tips.

This is exactly what people who are not currently students assume: College life is nothing but a predictable, drowsy conveyer belt. In reality, most kids over the age of 18 have a lot more to worry about than Saturday football games. Consider, for one, the hefty college bill they're accruing over the course of their education. Or the urgent need to collect a paycheck to pay off books or living expenses.

And nope, a lot of them can't escape taxes. For the next few pages, we'll look at some ways that students can get ahead of their annual April obligations.

10: Do You Need to File?

If you're making more than a standard deduction, then you must file taxes. (In 2014, the standard deduction is $6,200.) Do keep in mind that's earned income, meaning that you received it as wages or fees from working. Unearned income also must be reported, but only if it's over $1,000. (Unearned income might be from investment accounts or interest.) But even that might not be necessary; there are some ways for parents to report their children's unearned income on their own return [source: Fishman].

It's also not a great idea to assume that you don't have to file taxes if your earned income is below $6,200. Even if you made less than that, you might be due for a refund if tax was withheld from any of your earned income. Look and see if you've been paying taxes on your pay stubs; if so, you might just find that filling out a return will pay off.

9: Dependency

If you've decided to go ahead and file, it's really important that you check with your parents or guardians to make sure you're all on the same page about who's claiming what. Keep in mind that your parents might still want to claim you as a dependent, even if you've got your own fancy income and tax return. The exemption they earn is nothing to sneeze at, after all.

That might be cold comfort to a student who really wants that $250 refund. But keep in mind that if a parent is providing more than 50 percent of your support, you're probably not going to get a personal exemption anyway. The one thing you don't want to do is try to claim both -- that you're a dependent for your parents and also on your own. The IRS doesn't appreciate that scam, and it'll cause a lot of headaches for you and your parents.

If you're really bummed that your IRS-sponsored beer money is now a part of an exemption for your parents, do your best to convince them to give you a bit of the cash for yourself. (If that works, tell my parents to send me some money too.)

8: College Tax Credits

If you're a full-time college student, there are several tax credits that can help you relieve some of the burden of paying for higher education. One biggie is the American Opportunity Tax Credit (AOTC), which allows up to $2,500 per eligible student. It's available for the first four years of post-secondary education, and 40 percent of it is refundable. That means that you can receive up to $1,000 as a refund if you owe no taxes. You can claim it if you have a single income of up to $80,000, or $160,000 for joint filers.

If you're a fifth-year senior (or sixth or seventh -- we don't judge), you might be interested in the Lifetime Learning Credit (LLC). It's set at the same income limits, but you can take it for any number of years of higher education. It is designed to credit up to $2,000 of eligible college costs, and it's also quite helpful for grad students. Note that you can't take both the AOTC and the LLC during the same year.

7: Consider Doing Your Own Taxes

Now listen: There are probably college students with incredibly complicated taxes. Maybe they're like a young Bruce Wayne, with all sorts of interesting financial holdings and business stakes. When it comes to most college tax returns, however, most of us tend to skew more toward Peter Parker. Our accounts aren't exactly diversified, and our wages aren't raising IRS eyebrows.

For that reason, it's probably not entirely necessary for you to hire a fancy accountant/tax preparer. You should probably consider filling out the 1040EZ form, as long as you meet some qualifications -- you're filing without dependents, you make less than $100,000 and your income only comes from certain sources. (There are more rules, which you can read about on the IRS website [source: IRS].) It's probably going to save you loads of time and money to do it yourself online.

6: Student Loan Interest

Had to take out some student loans to pay for college? Join the club. A lot of folks do, and the government is even willing to give you some tax relief for the interest accrued on the loans. And here's some great news: The Student Loan Interest Deduction can be claimed even if you don't itemize your taxes. That means that the deduction will be taken out of your adjusted gross income, leaving you less taxable income in general.

You can write off up to $2,500 worth of student loan interest. But don't think that you can get away with trying to shoehorn that car loan interest in: Any loan must have been taken out solely for educational expenses, and it can't just be a loan from a relative or employer. This exemption also only qualifies you for the interest you paid during the year; you're not going to be able to write off future payments.