A lot changes when you head off to college. This may be the first time youâ€™re away from your family and financially supporting yourselfâ€”not to mention the first time you file taxes. Filing can be very confusing, especially if this is your first time. Before you have to file taxes next year, make sure you read through these tax tips for college students from a Denver accountant:
Understand Your Filing Status
The first thing you need to do as a college student who is filing taxes for the first time is figure out whether you are a dependent or independent. Parents can claim their children as dependents until they are 24 if they are students, so talk to your parents about whether or not they are listing you as a dependent on their tax return. If you are a dependent, you wonâ€™t be able to take advantage of any credits or deductions that your parents are already claiming on their return.
If you are paying your tuition or any other college-related expenses, you may qualify for a few different tax credits. The American Opportunity Credit is available to students in the first four years of their undergraduate studies as long as they have a modified adjusted gross income of under $90,000. If you qualify, you could receive a credit of up to $2,500, so this definitely one you should look into. The Lifetime Learning Credit is worth $2,000 per year, but you donâ€™t have to be an undergraduate student to qualify. Learn more about the lifetime learning credit
. If you donâ€™t qualify for either one of these credits, talk to your accountant about whether you are able to deduct any tuition or college-related expenses youâ€™ve had to pay out of pocket.
Were you awarded a scholarship? If the money you receive is used to pay for tuition, textbooks, and other school-related expenses, it is considered tax-free. However, if any amount of the scholarship money is used to pay for your living expenses, you will need to report it as income on your tax return. But, the full amount of the scholarship does not need to be reportedâ€”just the amount you used on living expenses. So, if you received a $10,000 scholarship and spent $9,000 on tuition and $1,000 on groceries and rent, only the $1,000 would need to be reported as income.
College is about learning new skills that will help you launch your career, so the last thing youâ€™re probably thinking about is retirement. However, itâ€™s never too early to put some money aside for the future, so every college student should consider saving a little bit every month in an IRA account. Anything you contribute to a traditional IRA is deductible, so you can save now while you save for the future.
Are you in college and about to file taxes for the first time? Get help from the professionals. Bloch, Rothman & Associates,Â Ltd.Â is a full service accounting firm offering personal and affordable Denver tax and accounting services for individuals and businesses. Contact Block, Rothman & Associates in Denver
for a free initial consultation.