Tax Day is around the corner and, if you’re a student, you might be wondering how scholarships, tuition, and textbooks could impact your potential tax return. The answer is: it depends. What you need to claim and can deduct is based on a variety of factors. Here are some of the things you should be aware of as you work to file your taxes this year.
If you earned a scholarship, the good news is that it’s likely not considered taxable income by the IRS. But it depends on how you use it. For example, scholarships can be spent on tuition, books and supplies used for pursuing your education. However, if your scholarship comes in exchange for a service you must perform, such as teaching or research, the payments may be taxable. Check out the IRS scholarship site for more information.
If you’re in the first four years of your undergraduate studies, you may qualify for the American Opportunity Credit. You can claim an annual credit of up to $2,500 to cover your qualified education expenses, such as tuition, fees, books, supplies, and equipment. Get more information about this credit on the IRS’s site.
Another potential tax benefit is the Lifetime Learning Credit, which may apply to students enrolled in an eligible undergraduate, graduate, and professional degree courses. You can claim 20 percent of tuition and certain related expenses, with a maximum credit of $2,000. The IRS offers complete information for this tax credit on their website.
You can only claim expenses on one tax benefit, and you cannot claim both credits for the same student in the same year. Education tax credits will depend on your income and are phased out for higher income taxpayers.
If you don’t qualify for education tax credits, it’s possible that you can claim tuition and eligible expenses that reduce your taxable income by up to $4,000. To be eligible you must:
- Not be claimed as a dependent on anyone else’s tax return, such as your parents
- File single/head of household with an adjusted gross income (AGI) less than $80,000
- File married filing jointly with an AGI under $160,000
- Not be married filing separately
Deductions do not cover room and board, extracurricular activities, fees for non-required courses, student health fees, insurance, and living expenses like housing, food, and transportation. Get a complete list of eligible deductions on the IRS website.
Free Filing Help
Students with an AGI of $72,000 or less can file their federal income taxes for free through IRS Free File site, which provides you with access to free versions of tax software, such as TurboTax. If you want personal assistance, you may be able to get free tax help from a Volunteer Income Tax Assistance program, which may be available on campus or in your community.
We’re not tax professionals and you should consult an expert with your questions. You can also visit the IRS site for students. Not currently a student but considering going back to school? Fortis can help by putting you on the path to a great education. Click here for more information or call us today at (855) 436-7847 and speak to one of our career counselors.