What College Grads Need to Know About Taxes
For most new college graduates, the relief of finally putting behind long lectures and all-nighters in the library and reading thick textbooks is over. Now, it’s time to be an adult and pay taxes! However, depending on how much income you’ve earned, you may have already been paying taxes throughout their college career.
To File or Not to File?
The requirement for students to filing taxes is to have an adjusted gross income of $10,150.
If their parents claim them as a dependent, the amount drops to approximately $6,200. The student must be under the age of 24 for that tax year. Additionally, they cannot claim their own personal exemption. Furthermore, their parents must have financially supported half of the student’s income.
At any rate, after graduating, the idea is to get a job. After all, it is the entire reason for earning that degree, right?
Whenever we earn money, we are obligated to pay taxes on it. However, there are some benefits to being a student where the Internal Revenue Service (IRS) is concerned.
Graduating students are eligible to claim interest on their loan, even if their parents are claiming them as a dependent. The filer must use form 1040 or 1040A. Also, it is not necessary to fill out an itemized deduction form to determine whether or not one qualifies.
There is a catch. The more money you make, the less likely you are able to qualify for this deduction. This claim amount lessons for households that earn up to $60,000 for unmarried individuals, and $125,000 for married couples. Households become totally ineligible for individual incomes that gross $75,000 and $155,000 for married couples.
Good news here! Students do not have to pay taxes on any scholarships that they’ve received. However, there is always a condition: The scholarship must go toward tuition only. If any monies are going toward room, board, and living expenses, the scholarship recipient must pay taxes on it.
There are two kinds of tax credits that students are eligible for:
1. The American Opportunity Credit
The American Opportunity Credit replaced the former Hope Credit that provided tax relief for students under a higher tax bracket. Individual with an adjusted gross household income of $80,000 for individuals and $160,000 for married couples qualify. Here, students qualify for a $2,500 credit on their annual tax filing.
2. Lifetime Learning Credit
Anyone in your household who enrolled in an eligible educational system may qualify for a $2,000 credit on their tax return. With the Lifetime Learning Credit, a student is eligible to claim this tax relief every year.
Job Search and Relocating
Save those receipts spent at your local copy store and post office. New graduates can also claim the expenses used for job searching as a deduction. Furthermore, if the job is full-time and requires at least a 50-mile relocation, expenses for that move can be deducted as well! So in this case, it is wise to save the receipts for mileage, packing materials, truck rental, gas, and lodging.
More to Learn!
There are many other tax credits and exemptions that you may be able to qualify for. As life happens, the IRS provides tax relief for some of these events. Find out other ways you can get money from the IRS—legally! Contact Success Tax Relief at 1-877-825-1179 or online to get the most out of your tax return.