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Tax Planning For Parents Of College Students
It can be difficult to file taxes on your own as a student, especially with all the intricate forms and technicalities. Along with all of your other responsibilities as a college student, whether it's schoolwork or a part-time job, filing taxes can be troublesome so we've put together this guide to help you file your taxes as a student.
Look Into Your College Student's Dependency Status
You are able to claim your college student as a dependent until they turn 19, but if your child is a full-time student, you're able to claim them until they're 24 if you provide more than half of their financial support. If you end up claiming your college student as a dependent, unfortunately, you are not eligible for tax credits and tax benefits.
A good tip for parents is to claim their college students as dependents because the tax benefits are usually higher for parents than for students filing themselves.
Claim Your College Student Education Tax Credits
Your college student may be qualified for an education tax credit, which can help you save money on your taxes. The college student must be enrolled at least half-time and pursuing a degree or other recognized educational certification for at least one of your academic periods to be eligible for the education tax credit.
The American Opportunity Tax Credit is worth a maximum cap of $2,500 per student in 2021. The AOTC is refundable as well, which means if the credit exceeds the amount of taxes you owe, you are eligible for a refund of some of the remaining credit. If your modified adjusted gross income is $80,000 or less, you are eligible to claim this credit.
The Lifetime Learning Credit allows you to deduct 20% of the first $10,000 in college tuition and fees paid during the year, up to a maximum of $2,000 in credit. Unlike, the American Opportunity Tax Credit, the Lifetime Learning Credit is not refundable.
You can't claim the Lifetime Learning Credit and the American Opportunity Tax Credit at the same time, just like how you can't claim this benefit if your MAGI is $69,000 or above. Note that, taxpayers will not be able to claim both these credits for one student in the same year, you can only choose either or.
Student Loan Interests
You can deduct the amount of interest paid on student loans from your taxable income if you have them. If you're already working to pay down your student loans, this is known as the student loan interest deduction, and it's a great tax benefit.
You can deduct up to $2,500 per year if you claim for this deduction. As a result, be careful to mention it on your tax return. However, this is one of those perks that only apply if your parents are not claiming you as a dependent on their tax return.
Resolve Your Tax Bills
If you've found yourself in a nasty mess with the IRS, take a deep breath. For taxpayers who may have difficulty paying off an excessive amount of tax debt, there's a new and improved relief program that consolidates many major relief programs into a one-size-fits-all assistance program. Any issues regarding back taxes, unfiled years, or any other tax-related problems may be solved through one program; the IRS Fresh Start Program!
See If You Qualify For The Fresh Start Program Today!
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