College students and their parents need to be mindful of several important considerations before filing their taxes. While it is beneficial for college students to start filing their own tax forms, both parents and students should thoroughly review everything before submitting. One crucial point to clarify is whether or not the student can be claimed as a dependent, as failure to check the “dependent” box can lead to complications when amending the return. Additionally, it is imperative to claim all eligible college and education tax credits, such as the American opportunity credit and the lifetime learning credit.
It is essential to ensure that all necessary forms are in hand before filing taxes, as some forms may need to be printed from college portals rather than being mailed. Furthermore, students who work multiple jobs should confirm that they have received all tax forms from each employer. Another important factor to consider is state residency, particularly if a student is paying their own costs and planning to claim in-state tuition in a state different from their parents’ residence. It is crucial to understand residency requirements and ensure that all aspects of the financial picture are considered.
In some cases, claiming a child as a dependent may not be the most advantageous decision when considering the entire financial situation. Parents and students should examine the rules for dependent filing and determine if the student is required to file their own return based on their gross income. Additionally, it is essential to maximize the benefits of a 529 account, as qualifying distributions are tax-free and can include room and board expenses in addition to tuition, fees, and books.
Parents and students should be aware of potential tax refund opportunities, as the IRS reports that over 940,000 individuals have not claimed expiring 2020 tax refunds totaling over $1 billion. Understanding and optimizing education tax credits, confirming the dependent status, ensuring all necessary forms are obtained, considering state residency requirements, and making the most of tax-advantaged accounts such as 529 plans are all essential factors to consider when filing taxes as a college student. By being thorough and meticulous in their tax preparation, students and their parents can maximize their tax benefits and avoid potential issues in the future.
