Important tips for college students filing taxes

Student calculating taxes

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

If you are a new college student, the thought of filing your own taxes may seem like an overwhelming prospect. Whether you’re applying for your first credit card, taking out student loans or, in this case, filing your taxes for the first time, these are all important financial life events that we experience as we enter adulthood. 

In this article, we’ll discuss when to know if you need to file taxes, whether or not your parents can claim you on their taxes and tips for filing your taxes as a college student. 

Do students have to file a tax return?

This depends on whether or not a student earned an income the previous year, and if so, how much they made. If you’re single and your earned income was less than $12,400 or you had less than $1,100 of unearned income in 2020, you are not required to file a return. 

However, if you had income tax withheld on your paychecks, you may want to consider filing. For example, let’s say you only made $10,000 during the year, but you had federal income tax withheld on your paycheck. In this case, you’ll benefit from filing a tax return because you may have money owed to you. Make sure to check your pay stubs to determine if you had these income withholdings. 

Guidelines for filing taxes as a college student.

You’ll likely be classified as an employee for most jobs, but it’s important to know if you’re classified as an independent contractor. If you’ve had freelance jobs during your college career, for example, you’re likely classified as an independent contractor, in which case taxes are not withheld from your paycheck. 

Can parents claim you on taxes? 

Yes. Parents can still claim their child while the child is a full-time student until the age of 24. If you’re a working student, your parents must still provide more than half of your financial support for you to be eligible as a dependent. 

According to the IRS, a parent can claim their child as a dependent if: 

  • The child is under 19 years old at the end of the year or under 24 years old and a student at the end of the year 
  • The child lived with the parent for more than half of the year 
  • The parent provided more than half of the child’s financial support during the year—like food, clothing, education and housing

If you’re a parent and meet the above criteria to claim your child as a dependent, you may be eligible for education tax credits. 

How do college students file taxes? 

The process of filing your taxes initially seems scary, especially if it’s your first time. But once you have all of the correct information and necessary documentation, the process should be pretty straightforward. As a college student filing a tax return, you’ll be using the standard Form 1040, which reports your filing status, yearly income and any credits or deductions you plan to claim. 

Below we’ve outlined the important steps you’ll need to take to file your tax return:

Important tax documents for college students.

Determine your dependency status 

The most important thing you need to know as a student is whether or not your parents are still claiming you as a dependent. Remember, if your earned income was over $12,400 during the year, you should file a tax return. If your income was below that level, you can still file a return if you had taxes withheld from your paycheck, but it’s not required. 

For tax purposes, it may be smarter for your parents to claim you as a dependent while you’re in college as the tax benefits may be higher for them. If their income level is too high to qualify for educational tax credits, then you may want to consider filing your own tax return.  

Calculate your income 

Once you know your dependency status, you’ll want to be aware of the amount of income you earned for the tax year. You will receive a Form W-2 from any of your employers, which will display the amount of income you earned. 

If you’ve received scholarships or grants to help cover the costs of tuition and other qualified education expenses, these are considered tax-free in most cases. But, if you used a portion of your scholarship funds for incidental expenses, such as housing, you will have to claim the amount used toward those expenses as a part of your income. 

Compile your student tax forms

There are many important tax documents that students need to be aware of, as these documents will help you file your tax return smoothly. Below is a list of all of the tax forms you may need to file and what each form is used for:

  • Form W-2: You’ll receive this form from your employer, and it will contain your income and any taxes that were withheld. 
  • Form 1099: If you did freelance work and were classified as an independent contractor, you should receive a Form 1099, which will contain your income amount. Be aware that since taxes were not withheld from this income, you may end up owing money after filing your taxes. 
  • Form 1098-T: Your school will send you a form 1098-T, which you’ll need if you are claiming education tax credits. This form will include information on your educational expenses, such as tuition and any scholarships you received. 
  • Form 1098-E: If you or your parents have started making student loan payments, your loan provider will send you Form 1098-E, with which you’ll be able to deduct some or all of the interest paid on qualifying student loans during the previous tax year. 
  • Form 8863: You will need this form when filing if you’re looking to qualify for education tax credits such as the American opportunity credit or the lifetime learning credit. 

Claiming education tax credits and deductions 

There are two tax education credits available to claim on your tax return—the American opportunity credit and lifetime learning credit. The IRS states that in order to claim an education tax credit you must meet all three of the following criteria: 

  1. You, your dependent or a third party pays for education expenses for higher education
  2. The eligible student is enrolled at an eligible educational institution
  3. The eligible student is you, your spouse or an individual you claim as a dependent on your tax return 

American opportunity tax credit 

The American opportunity tax credit (AOTC) is a credit that can be used to deduct qualified education expenses to students during the first four years of being enrolled in a higher education program. You can receive a maximum credit of $2,500 per year, and if the credit brings the amount of taxes you owe to zero, you are eligible to receive up to 40 percent ($1,000) of the remaining credit in the form of a tax refund. 

To qualify, you must be attending a qualified educational institution, working toward a degree or other credential and be enrolled at least halftime for one academic period. You cannot claim the AOTC for more than four tax years and are not eligible if you’ve had a felony drug conviction.

To claim this tax credit, your modified adjusted gross income must be less than $90,000 if filing single or less than $180,000 if married filing jointly. 

Lifetime learning credit 

The lifetime learning credit (LLC) is a credit used for qualified tuition and related educational expenses paid for students enrolled in an eligible institution. Similar to the AOTC, the LLC allows you to claim up to $2,000, but it is nonrefundable. So unlike the AOTC, you will not be able to receive a portion of the credit back if it drops your taxes owed to zero. 

This tax credit can be used during any year of higher education programs, not just the first four years. It can be used to help pay for undergraduate courses, graduate courses, professional degree courses and courses used to improve job skills. 

To qualify for this credit you do not need to be pursuing a degree, but you must be enrolled or taking courses at an eligible institution. Your modified adjusted gross income must be less than $69,000 if filing single or less than $138,000 if married filing jointly. 

Student loan interest deductions 

Aside from these education tax credits, students are also eligible to deduct interest paid on qualified student loans. You can claim up to $2,500 in student loan interest, which will be deducted from your taxable income. To qualify for this deduction, you must have paid interest on a qualified student loan during the tax year and your modified adjusted gross income must be less than $80,000 if filing single or $160,000 if married filing jointly. 

Ensuring you file your taxes properly and accurately is important in developing healthy financial habits throughout adulthood. Though filing taxes as a new college student can seem intimidating, following the tips provided in this guide can help make your process as smooth as possible. 


Reviewed by Miriam Allred, an Associate Attorney at Lexington Law Firm. Written by Lexington Law Firm.

Miriam Allred was born and raised in Southern California. After high school she joined the US Navy. She then went on to get an Economics degree from Chapman University where she got to enjoy an internship at the United States Supreme Court. Miriam then went to Brigham Young University where she received her Juris Doctor. Prior to joining Lexington Law, Miriam worked as a civil rights attorney dealing with discrimination and sexual harassment. In this role she helped write and create policies and investigate sexual harassment and discrimination complaints. Miriam also has experience in family law. Miriam is licensed to practice in Utah.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

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When is Medicare Open Enrollment?

It’s that time of year again when you have to make important decisions about your Medicare coverage. 

Medicare open enrollment runs from Oct. 15 to Dec. 7 each year. During this period, you can switch from original Medicare to a Medicare Advantage plan, or vice versa. You can also choose a new Advantage plan or new Medicare Part D prescription drug coverage. Coverage will begin in 2022. 

However, if you decide you don’t like your selection, you can make a change during the Medicare’s general enrollment period, which runs from January 1 to March 31 each year. Selections made during this period take effect on July 1.

During this time, if you didn’t sign up for Medicare when you turned 65 and you don’t qualify for a special enrollment period, you can enroll in Parts A and B. (You can qualify for a special enrollment period for certain life events, such as moving to a new place that isn’t in your current plan’s service area.) Medicare Advantage beneficiaries can also switch to a new Advantage plan or back to original Medicare. 

Medicare provides a tool to help you compare the costs of different medigap, Medicare Advantage and Part D prescription drug plans. The tool will tell you the out-of-pocket maximum and what your specific medications would cost for different Medicare Advantage plans while giving you price ranges for medigap plans available in your area. You can also enter details about your specific medications and see what these would cost under your Part D options. 

Source: kiplinger.com

5 Different Types of Insurance Policies & Coverage That You Need

There are an overwhelming amount of insurance options on the market. While thorough coverage is important, it’s also possible that you can have too much coverage. Paying too much money for insurance could leave you financially vulnerable in other areas, like your emergency fund or retirement savings. How do you know what types of insurance are absolutely necessary, and what’s superfluous?

To learn about different types of insurance, continue reading through.

  1. Health Insurance
  2. Car Insurance
  3. Homeowners or Renters Insurance
  4. Life Insurance
  5. Disability Insurance

1. Health Insurance

What does it cover?

Health insurance covers your necessary medical costs, from doctor’s appointments to surgeries. Along with coverage for illnesses and injuries, health insurance covers preventative care, such as monthly check-ins and tests.

Do you need it?

Health insurance is arguably the most important type of insurance.

A 2016 Kaiser Family Foundation/New York Times survey found that one in five people with medical bills filed for bankruptcy. With a stat like this, investing in health insurance can help you prevent a significant financial hardship. 

For example, if you’re a federal employee, you can choose from a variety of healthcare plans on OPM.gov. Or, if you’re an independent contractor, you can look into freelancer insurance to create your own benefits package.

When you’re going to purchase health insurance, consider the following:

  • Needs: Young and healthy single persons require less coverage than those with families, the elderly, or persons with chronic health issues. If you think you’re going to be using your insurance frequently, you’ll want to find a plan that has a low deductible and copays.
  • Doctors: If you like your doctor, try and find a plan that allows you to keep your current physician.
  • Cost: Analyze your budget and determine what you can afford. Remember that plans with higher copays and deductibles also have lower premiums, while plans with high premiums usually have lower copays and deductibles.

You probably don’t need it if…

Every adult should have health insurance. Children are usually covered under one of their parents’ plans.

2. Car Insurance

What does it cover?

There are several different types of car insurance that cover different scenarios, including: 

  • Liability: Liability insurance comes in two forms: bodily injury and property damage liability. These do not cover the driver or passengers–only pedestrians.
  • Personal Injury Protection: This type of coverage will cover medical expenses related to driver and passenger injuries.
  • Collision: Collision insurance will cover the cost of the damage to your car if you get into an accident, whether you’re at fault or not.
  • Comprehensive: Whereas collision insurance only covers damage  to your car caused by an accident, comprehensive insurance covers any car-related damage, whether it’s a tree falling on your car or vandalism from unruly neighborhood kids, for example.
  • Uninsured or Underinsured Motorist: This covers you in the event that the person who hits your car does not have enough insurance to cover the damage.

Always be on the lookout for car insurance discounts when you’re shopping for a plan. There are plenty of discounts you may be eligible for to lower your monthly bill, including safe driver, married driver, and multi-car discounts.

Do you need it?

Yes! Every state requires you to have auto insurance if you’re going to drive a vehicle. If you just purchased your first car or have been driving uninsured, it’s time to find a plan with an auto insurance finder, so you have your back covered in the event of an accident.

You probably don’t need it if…

If you don’t own a vehicle or have a driver’s license, you won’t need car insurance.

3. Homeowners or Renters Insurance

What does it cover?

Homeowners insurance covers your home against damage and theft, as well as other perils such as damage to a visitors property, or any costs if someone was injured on your property. It also covers your home’s foundation, roof, and walls, as well as personal property. However, you may need additional insurance to cover natural disasters, like flooding, earthquakes, and wildfires.

Renters insurance covers you against damage or theft of personal items in an apartment, and in some cases, your car. It also covers liability costs if someone was injured in your apartment or if their belongings were damaged or stolen from your apartment. However, renters insurance typically does not cover extremely valuable items, damage from pests, and damage from natural disasters. 

Do you need it?

Homeowners insurance is absolutely essential because a home is oftentimes one’s most valuable asset, and is often required by your mortgage lender. Not only is your home covered, but most of your valuables and personal belongings are covered, as well.

Renters insurance isn’t as crucial, unless you have a large apartment that has plenty of valuables. But even if you don’t, know that renter’s insurance is usually very low-cost, so it might be well worth the peace of mind it provides. Our blog post on renters insurance questions can help you decide whether purchasing this type of insurance is right for your situation.

You probably don’t need it if…

You don’t need homeowners insurance if you don’t own a house. Likewise, you won’t need renters insurance if you’re not renting an apartment.

4. Life Insurance

What does it cover?

Life insurance covers costs associated with dying, such as burial and mortuary fees. Life insurance can also help pay off any of your debts, such as your mortgage and loans, or for everyday expenses. If you’re the primary breadwinner of the family, life insurance will also help your family offset lost income. The latter is the main reason why people buy life insurance. It’s important to keep in mind that life insurance expires.

If you pass after the expiration date of your life insurance coverage, your beneficiaries will not receive your death benefit. Additionally, if you make any false claims to your insurer and they find out, they may deny your beneficiary’s claims. For example, if you fail to let your insurer know you smoke and they review your life insurance application for fraud, your beneficiaries can be at risk for not receiving your death benefit.

Do you need it?

Life insurance is the type of insurance that most people want to avoid thinking about. However, it’s incredibly important. If you have a family, you also have a responsibility to make sure they’re provided for in the event that you pass before your time, especially if you have children or if you have a spouse that’s not working. Life insurance will help your family financially cope when you pass, and with it, you can ensure your family will be able to move on financially even when you’re gone.

You probably don’t need it if…

If you’re single and unmarried, you most likely don’t need life insurance, although there are other important types of insurance for singles.

5. Disability Insurance

What does it cover?

Disability insurance is similar to life insurance because it provides financial coverage if something happens to you. If you get injured and aren’t able to work, disability insurance will reimburse you for lost income. Disability insurance can cover permanent, temporary, partial, or total disability. However, it does not cover medical care and services for long-term care.

Do you need it?

The Center for Disease Control and Prevention states that nearly one in four Americans have a disability that impacts major life events, which makes this type of insurance sensible for everyone, even if you’re young and single.

Disability insurance is relatively affordable, but it could provide tremendous financial help if you become disabled for any length of time. You can learn more at Ssa.gov.

You probably don’t need it if:

Children don’t need disability insurance because they have no income. However, you never know when you may become injured or sick, which is why disability insurance can be a good idea, especially if you work in a particularly dangerous job setting.

5 Unnecessary Insurance Policies

There’s lots of insurance you might not need, such as:

  • Flight Insurance: Flying is one of the safest modes of travel.
  • Life Insurance for Kids: Life insurance exists to replace lost income. Children have no income.
  • Accidental Death Insurance: Even the accident-prone should skip this type of insurance. It generally contains so many restrictions, that it’s nearly impossible to collect.
  • Disease Insurance: A good health insurance policy is probably a far better investment than trying to cover yourself for every type of ailment that’s out there.
  • Mortgage Life Insurance: Here’s another redundant form of insurance. A good life insurance policy with a long term will cover your mortgage in the event of your death.

Should I get pet insurance?

The problem with pet insurance is that it typically doesn’t cover annual vaccinations, spaying, and neutering. Thus, it only becomes valuable if your pet has a serious injury or chronic illness.

However, if your pet is an ingrained part of your family and you’re willing to pay high veterinary costs to treat major illnesses and injuries, pet insurance might be worth the money.

Be Secure, Not Paranoid

Humans have a pretty strong sense of self-preservation, so it’s natural to feel an urge to protect yourself against any and every calamity. Most people would rather pay a little bit of money each month than struggle to come up with a larger amount of money in a time of crisis.

On the flip side, there are lots of people who think they have nothing to worry about, that they probably won’t ever need one of the many insurance types out there.

It’s best to take a stance somewhere in between these two mentalities. You should definitely consider buying all or most of the 5 necessary types of insurance mentioned above. These are the most important insurance types that provide huge financial relief for very realistic scenarios.

Outside of the 5 main types of insurance, you should think carefully before buying any additional insurance. If you pay too much money for insurance, you could significantly restrict your budget, and thus, your quality of life.

Only buy additional insurance policies when there’s a reasonable chance you’ll collect. For instance, if you live in earthquake-prone areas of California, earthquake insurance would be a smart investment. Likewise, flood insurance is recommended if you live somewhere that’s prone to flooding. But even if you’re a frequent flyer, you still probably won’t need flight insurance.

Finally, when buying insurance, always make sure you can afford it. Remember, insurance is meant to protect you and your finances, not hurt them. If you need assistance with budgeting, try using a bill payment tracker which can help you maintain all of your insurance payments so you’ll have a better grip on your personal finances.

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