In 2011 71% of the nation’s 19.7 million college undergraduates were working. The numbers have changed over the past few years. Today, more than 75% have a part time job in order to pay their bills. Odds are the majority of these youths live below the poverty line. Students face many expenses such as rent, transportation costs, tuition, health insurance, food and much more. For students whose parents earn low revenue, there are grants offered by the government. That is not enough for a student.
During this tax season, all we hear are W2s, W4s, forms and accountants. Two out of five students on campus do their own taxes. There is a lot of free software out there that makes filing taxes simpler. Turbotax, TaxACT Deluxe and TaxBrain can be helpful. Nonetheless, many tax filers complain about their return when they use this free software. Another option is to use the free VITA program. However, complaints abound about the efficiency of these free services.
The solution is to get help from a tax specialist. You might pay $100 to $150 but it’s worth it. Students already have enough expenses and you don’t want to pay out of pocket to the government.
American Opportunity Credit. Students are eligible to claim up to $2,500 for the first four years of post-secondary education. Since 40 percent of this credit is refundable, students can get back up to $1,000 on their refund.
Lifetime Learning Credit. For students earning less than $60,000 (single-filers) or $120,000 (married and filing jointly), they can claim up to $2,000 in education-related expenses.
Tuition and Fees Deductions. Like the American Opportunity Credit, students earning less than $80,000 (single) or $160,000 (married and filing jointly) can deduct up to $4,000 in tuition and fees on their annual tax returns. Use it while you can –– this tax break is set to expire at the end of 2013, unless lawmakers extend it.
Student Loan Interest Deduction. If you’ve taken out a federal or private student loan, you’re eligible to deduct up to $2,500 of interest paid on the loan as an ‘above-the-line’ exclusion from your income. You don’t have to itemize your deductions in order to claim it.
Note: College students can claim only one of the above tax credits per year, but parents supporting more than one child in college can claim tax credits on a per-student basis.
Montgomery County is known as one of the richest counties nationwide. However, Montgomery College students are not the richest. It would be wiser for you as a student to use these tips next time you work on your taxes.