If you do not normally file a federal tax return, you might consider filing this year. Congress continued the federal income tax credit available to students and their families with tuition and other eligible college-related expenses for the tax year.
If you are claimed as a dependent on another person’s (such as your parents) tax return, only the person who claims you as a dependent can claim a credit for your qualified educational expenses.
The American Opportunity tax credit applies to the first four years of your undergraduate studies. You may claim up to $2,500 for this credit if you meet the income requirements and are attending school at least half-time. Even if your income level was not high enough during the year to incur federal income tax liability, up to 40 percent ($1,000) of the tax credit can be received as a refund.
The Lifetime Learning Credit helps parents and students pay for undergraduate, graduate and continuing education. You may claim up to $2,000 for qualified education expenses depending on your income level.
Depending on your individual circumstances, there are additional tax credits and deductions that may be better for you. For guidance, consult a tax advisor or view the IRS Publication – Tax Benefits for Education.
Action is required if you want to view your 1098-T tax form electronically on WebAdvisor.
Log in to WebAdvisor and select Financial Information. Then select 1098Electronic Consent. Follow the instructions. Once you have completed this, the college will let you know when the 1098-T forms are ready to view. They will be available before January 31, 2015.
If you DO NOT complete the electronic consent on WebAdvisor, and you are studying on campus during the spring semester, your 1098T tax form will be mailed to you by January 31.
Financial aid used solely for tuition, fees, books and/or required course equipment and supplies is not taxable. In addition, student loans are not taxable income.
Work Study income is taxable. You will receive a W-2 from Central College in late January. Your W-2 will list your work-study earnings for the prior year and this amount must be included on your income tax form. When you complete your FAFSA, remember to list your work-study earnings under “taxable earnings from need-based employment programs” in question 44 – Additional Financial Information.
A tax credit reduces your tax liability or the amount of taxes you owe, regardless of your tax bracket. A deduction will decrease your taxable income, with the amount of the deduction dependent upon your tax bracket. A $1,000 credit will reduce your taxes owed by $1,000, while a $1,000 deduction will decrease your income by $250 if you are in the 25% tax bracket.
It is best to calculate any credits and/or deductions you are eligible for, then select the one that benefits you the most.
Check with the IRS or a tax advisor for additional information or if you have questions.