10 Tax Benefits for College Students

She's definitely not thinking about taxes, but she might be if she knew that a refund from the taxes she paid at her summer job was coming.
She's definitely not thinking about taxes, but she might be if she knew that a refund from the taxes she paid at her summer job was coming.
Sam Edwards/OJO Images/Getty Images

Most college students probably aren't spending too much time worrying about the financial implications of their offshore accounts or stressing about capital gains taxes. But that doesn't mean they won't have some questions about how some basic college expenses could positively benefit their taxes. So, here we'll take a look at some ways that you (and your parents) can get a tax boost from things like deductions and credits -- and we'll even throw in a few tips, to boot.

One big benefit for college students (a college student might argue) is that they might not have to file a return at all. Between possibly being claimed as a dependent and just not making enough money, you may find that filing isn't for you. So let's start by taking a look at whether filing your tax return might actually present a benefit you weren't expecting.

10: File for a Refund

Say you're thinking that filing your taxes might not be worth it this year. Remember that you don't have to file if you're under a certain income limit ($6,200 in 2014) and you're a dependent; if you're not a dependent, you can make up to $10,000 and still ignore the tax deadline. But before you pump your fist and celebrate the extra 20 minutes you'll get to spend not filing a return, you might want to reconsider.

Even if you don't need to file your return, you might be due a refund if you do go ahead and give your paperwork to Uncle Sam. Remember that if you made any wages or salary from an employer, they should have withheld federal taxes from your check. Even though you might not have made a ton of money, a sizable chunk of that might be due back to you.

9: Give Yourself a Break

Now, not all college students receive assistance from their parents; many young learners are making their own way without financial help from Mom or Dad. But if you are a dependent, it's definitely to your benefit to make sure you're getting the best bang for your tax buck by filing your own taxes -- or letting your guardian get the tax breaks on your behalf.

We'll get into the specific tax credits next, but where you put them -- whether on your own tax return or your folks' -- might provide an advantage. If your folks, for instance, make too much money to meet some of the income thresholds for the college tax credits, you should consider filing a return. (Just remember that they can't claim you as a dependent if you take the college credits.) As we'll see, one of the credits has a refundable percentage, meaning that while it can't just eliminate your tax liability, it can provide you with a refund if it exceeds your tax bill.

8: Lifetime Learning Credit

So now let's get to the good stuff. How are we going to make those higher learning expenses disappear from our tax returns? There used to be three different credits or deductions that families could use to offset the cost of college, but one -- the tuition and fee deduction -- expired in 2013. (There was some criticism that it didn't help lower-income students, since it was deducted from the income subject to tax; those who made more money could take more of a deduction, even if they were paying the same costs [source: Burd]).

One option that was left over was the Lifetime Learning Credit. The credit limit is $2,000, or 20 percent of up to $10,000 in expenses. While we'll see that there's a more exclusive credit for four-year college students, the Lifetime Learning Credit can be taken for any kind of higher education, including graduate work and part-time learning. Remember that you can't just write in "Lifetime Learning Credit" on the old tax form and expect a $2,000 deduction; only qualified expenses count. Tuition and mandatory fees apply, as do some course materials.

7: Student Loan Interest Deduction

Before we discuss another college tax credit you can take on your return, there's another deduction that many students qualify for -- one that's a real lifesaver if you're trying to keep your head above water with borrowed money to pay for college.

The Student Loan Interest Deduction is just that: a way to write off the cost of your student loan interest. (Alas, you can't write off the whole bill itself.) In general, the limit of the write-off is $2,500, or the actual amount of interest you paid during the year. (Unfortunately, the IRS makes you take whichever is less.) But the even better news is that you can write off the cost without itemizing your deductions. Because the Student Loan Interest Deduction is an adjustment to income, you can take it even if you opt for the standard deduction on your tax return.

6: American Opportunity Tax Credit

OK, we've waited long enough. There's a credit that's a little more substantial than the Lifetime Learning Credit, and it has benefits that are pretty appealing in comparison. The American Opportunity Tax Credit (AOTC) replaces the former Hope Credit, and it has higher phase-out limits than Hope did -- meaning more people can take it.

The AOTC covers 100 percent of the first $2,000 of qualified expenses, plus 25 percent of the next $2,000. (This means the maximum credit is $2,500, $500 more than the Lifetime Learning Credit.) You can't claim the credit if you have more than four years of college credits under your belt -- so grad students don't get to snag it. But here's some great news: It applies to every student in the family. So, if you and 17 siblings are all enrolled in college (impressive), then your parents can take 17 credits (just expect some questions from the IRS).