How Does Going To College Yourself Affect Tax Filing?

How does going to college yourself affect tax filing? If you are a college student, whether you are an adult returning to continue your education or a young adult attending after high school, there are some things you may want to be aware of when tax season rolls around.

The first thing you'll want to determine if you were attending a post-secondary school and still under 24 years of age in the last tax year is whether you will be claiming yourself, or whether your parents will be claiming you as an exemption. Brian K. Gilroy, Attorney and CPA, explains that this is not a choice either you or your parents make, but based on specific IRS guidelines on what constitutes a dependent. "I've had clients come in and say that they have a choice on whether they want to claim someone or someone wants to claim themselves... probably universally, it's not that the client really has a choice. If they check the code properly you'll find there's an answer on whether someone's a dependent or not."


Some of the things that will determine whether or not you are a dependent is how much money you earn, if you were supported by anyone (and how much), as well as where you technically lived for more than half the tax year (spending time away at school may not count). If you are considered someone's dependent, generally the tax payer claiming you will take any allowable deductions or tax credits. If you do not qualify as a dependent, you can file your tax returns and claim yourself, taking the deductions and tax credits for which you qualify.




Another way to save money is to take advantage of educational savings accounts. Says Mr. Gilroy, "[When] you put money in to an educational savings account, the money you put in is not deductible; so you pay taxes on it originally... all the moneys it makes while it's in there are not taxed, and if you use it for qualified purposes for education in the proper amounts you don't pay any taxes on any of the distribution. So all the interest that it earns is tax-free interest... There's phase-outs for when you're allowed to put money in, and a list of qualified expenses."

There are tax credits for eligible students that you may qualify for if claiming yourself (or your parents may qualify for if claiming you). "There's Hope credit and the Lifetime Learning Credit," says Mr. Gilroy. The Hope Credit is for up to $1,500 for qualifying students, and the Lifetime Learning Credit is good for up to $2,000 for qualifying students. You (or the tax payer claiming you) is only entitled to only one of these credits per year per eligible, so you'll need to consult with a tax expert, or check out IRS publication 970, Tax Benefits For Education, to see which credit would apply to your situation.

If all or most of your tuition is coming from your employer through continuing education opportunities offered by your company, you may not qualify for the lifetime learning credit. According to Mr. Gilroy, "The lifetime learning credit is claimed by the person that pays the majority of the expenses." If you are paying part of your tuition, however, you may be entitled to claim part of the credit and should seek advice from a tax professional.

When you're a student, you'll want to take every opportunity that your school is offering to its students. Most colleges and universities offer tax assistance to students. Check with the business office and take advantage of the help they may provide.

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