Full-time students are not automatically exempt from taxes or from filing a tax return. You may be surprised to find out how much of your income is taxable and how much you owe in taxes if you did not have enough withheld during the year. Even if you are not required to file a tax return, you should consider filing one anyway to obtain a refund for any federal income taxes that may have been withheld from your income. You might even qualify for the Earned Income Credit, a refundable credit that may give you money even if you had no taxes withheld.
Income and any tips you earned from a summer job or a part-time job (such as bartending or as a cashier) you took to help pay for school expenses are taxable. You should receive a Form W-2, Wage and Tax Statement, from each of your employers. Payments for work you do on your own to earn extra money for school, for example painting houses or mowing lawns on the weekend, are considered self-employment income and must be reported on your return.
You may have used distributions from qualified education programs to pay for your education. You should receive a Form 1099-Q, Payments from Qualified Education Programs, reporting these distributions. Earnings on withdrawals you make from your Coverdell education savings account (Coverdell ESA) or from a qualified tuition program (QTP), such as a 529 program, are not taxable if used for qualified higher education expenses.
If you are a degree-seeking candidate, you generally can exclude from income the amount of any scholarship (including athletic scholarships), fellowship, or Fulbright grant used for tuition and fees required for enrollment or attendance, and fees, books, supplies, or equipment required for your courses. You cannot exclude from income any amount used for other purposes, such as room and board, travel, research, teaching, clerical help and equipment. If you are not a degree-seeking candidate, the entire amount received is taxable. You should receive a Form W-2 reporting the taxable amount of your scholarship. Pell Grants and Supplemental Educational Opportunity Grants are nontaxable scholarships to the extent they are used for tuition and course-related expenses during the grant period. If you participate in a Reserve Officers' Training Corps (ROTC) program, any educational and subsistence allowances received are excluded from your income, but active duty pay received while attending summer advance camp is included.
You may be able to use your qualified education expenses, such as tuition, to reduce your taxes. These education expenses must not have been paid for using tax-free money; for example those paid for with a nontaxable scholarship or with a tax-free distribution from your Coverdell ESA. You may be eligible for either of the education credits: the American Opportunity Credit or the Lifetime Learning Credit. You should receive Form 1098-T, Tuition Statement, reporting the tuition payments you made.
When you graduate, there are other deductions you may be able to take, such as for student loan interest payments and for moving expenses. If you took out a loan to pay for your education expenses, and you are making payments on that loan, you may be able to deduct up to $2,500 of the interest. You should receive a Form 1098-E, Student Loan Interest Statement. In certain circumstances, if your student loan is cancelled, you may not have to include any amount in income.
If you accept a job and need to relocate, qualified moving expenses not reimbursed by your new employer may be taken as a deduction. You should keep receipts to substantiate these expenses. If you meet the requirements, you may be able to deduct the following expenses:
- Moving your household goods and personal effects (including in-transit or foreign-move storage expenses)
- Traveling (including lodging but not meals) to your new home. If you use your car, you can calculate your car expenses by deducting either:
- Your actual expenses, such as gas and oil for your car
- The standard business mileage rate
- Whether you use actual expenses or the standard mileage rate to calculate your expenses, you can deduct parking fees and tolls you pay in moving. You cannot deduct any part of general repairs, general maintenance, insurance, or depreciation for your car.