With the April 15 deadline approaching, first-time tax filers should pay close attention to the fine print.
While tax season may not be most peoples’ favorite time of year, it is a time when the tables are turned and the government may owe you money.
Though this doesn’t happen in all situations, as a college student, chances are you’re not bringing in a large enough income to owe anything. Filing on your own may be a first this year, but there are important things to remember.
Filing early and being aware of possible credits can make the April 15 deadline less confusing and stressful.
There are three major credits available to college students.
The American Opportunity Credit, formerly the Hope Scholarship Credit, gives a discount of 100 percent of the first $2,000 spent on tuition and 25 percent of the second $2,000.
The total savings amount of $2,500 can be applied during the first two years of schooling.
The Lifetime Learning Credit is 20 percent of tuition and other school-related expenses; the maximum credit is $2,000.
The Higher Education Expenses Deduction allows you and your family, to deduct up to $4,000 if your family meets certain earning requirements. But deductions work differently than credits, so the actual amount deducted could be a lot less.
When considering these refunds, it’s important to talk to parents and family members about filing. These credits only apply if you owe money for taxes, not if you’re looking at a refund.
If a parent is paying more than 50 percent of your expenses, they can claim you as a dependent, which may be a wise choice.
While you may have had your sights set on a $100 refund coming your way, your parents, who are in a higher tax bracket, may be able to save a lot more claiming you as a dependent.
At the same time, it’s important to know what is taxable to ensure accuracy when filing. Most grant and loan money is tax-free, but there are exceptions. For instance, some grants and loans that include room and board can be considered taxable.
Living arrangements make a difference in where you file. While this may seem pretty straightforward, for some college students who live in another state and go to Temple, determining your residency could work a little differently.
The deciding factors for full-time residency vary from state to state, so you may have two states trying to tax you.
There are experts who can take the burden of filing off your shoulders. At the corner of Broad Street and Girard Avenue is the Liberty Tax Service, and a little further south is Jackson Hewitt. H&R Block is located a little closer to Main Campus, at Broad and Stiles streets.
The local group Philly Free Taxes has been holding tax consultation sessions throughout the city and even as close as Ritter Annex. They’ll continue to do so at select times throughout the remaining months of the season.
But while the option of handing over your finances to someone else may seem tempting, beware of services that offer “rapid refunds.” Many use high-interest loans that will, in reality, cut deeply into the actual refund that will end up in your pocket.
Kara Savidge can be reached at email@example.com.