Student Taxletes
Learn more about your tax filing requirement as a student and the special tax incentives for attending institutions of higher education.
Tax Return Filing Requirements for Students
Many students have trouble determining whether they are required to file a federal income tax return, especially if a parent can claim them as a dependent on their tax return. Students can quickly determine whether they are required to file a tax return by using the IRS's Interactive Tax Assistant tool. Note, even if a student is not required to file a tax return, doing so may enable the student to receive a tax refund. Access the tool through the following link:
File Your Taxes for Free
If you are required to file a tax return, or if doing so would entitle you to a tax refund, strongly consider using the IRS Free File program to safely and conveniently file your taxes from the comforts of your home. Individuals who made $72,000 or less in 2020 are eligible to use the Free File program. Find out more information on our Free File program page or click the link below to go right to the Free File Lookup tool---a quick way to find a free offer based on your specific circumstances.
Scholarships & Grants
Nontaxable Portion of Scholarships & Grants
Generally, you are not required to pay taxes on funds you receive in connection with a scholarship, a fellowship grant, or other grant. However, you must satisfy the following two conditions for the funds to be nontaxable:
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You attend an educational institution that maintains a regular faculty and curriculum, and one that normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities; and
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The funds received are used to pay for tuition and fees required for enrollment or attendance at the educational institution (or used for fees, books, supplies, and equipment required for courses at the educational institution).
Taxable Portion of Scholarships & Grants
According to the IRS, the following scholarship and grant amounts are subject to tax and must be included as part of your gross income on your tax return:
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Funds used for incidental expenses (e.g., room and board, travel, and optional equipment); and
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Funds generally received as payments for teaching, research, or other services required as a condition for receiving the scholarship or fellowship grant).
Education Tax Incentives
Available Tax Credits
An education tax credit helps subsidize the costs of higher education by reducing (dollar-for-dollar) the amount of tax owed on your tax return. If the credit reduces your tax liability to less than zero, you may be entitled to receive a refund. There are two types of education credits available: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). Learn more about these two credits in the FAQ section below.
Use the IRS's Interactive Assistant tool to determine if you are eligible to claim an education credit, and whether you can claim a tax deduction for qualified education expenses. Access the tool using the following link:
Students: Frequently Asked Tax Questions
General
Filing Requirements: Do I need to file a tax return if I am student? What if a parent (or someone else) claimed me as a dependent on their return?
It depends.
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You earned more than $12,200 in a single tax year from a job or jobs; or -
You received more than $1,100 of unearned income (e.g., taxable interest, ordinary dividends, and capital gain distributions).
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You earned more than $12,200 in a single tax year from a job or jobs; or -
You received more than $1,100 of unearned income (e.g., taxable interest, ordinary dividends, and capital gain distributions); or -
Your gross income was at least $5 and your spouse files a separate return and itemizes deductions.
Scholarships & Grants: Do I need to pay taxes on the funds I received as part of my scholarship or grant?
It depends.
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You attend an educational institution that maintains a regular faculty and curriculum, and one that normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities; and -
The funds received are used to pay for tuition and fees required for enrollment or attendance at the educational institution (or used for fees, books, supplies, and equipment required for courses at the educational institution).
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Funds used for incidental expenses (e.g., room and board, travel, and optional equipment); and -
Funds generally received as payments for teaching, research, or other services required as a condition for receiving the scholarship or fellowship grant).
Employer Educational Assistance: Are there any special tax considerations for educational assistance I received from my employer?
According to the IRS, if you receive educational assistance benefits from your employer under an educational assistance program, you can exclude up to $5,250 of those benefits each year. This means your employer should not include the benefits with your wages, tips, and other compensation shown in box 1 of your Form W-2.
Deductions
What is a tax deduction?
Student Loan Interest: Can I deduct the interest I paid towards my student loan debt?
What are considered qualified education expenses for purposes of the student loan interest deduction?
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Tuition and fees; -
Room and board; -
Books, supplies and equipment; and -
Other necessary expenses (such as transportation).
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The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student; or -
The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution.
Can I deduct the costs associated with education for work?
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The education is required by your employer or the law to keep your present salary, status or job. The required education must serve a bona fide business purpose of your employer; or -
The education maintains or improves skills needed in your present work.
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Is needed to meet the minimum educational requirements of your present trade or business; or -
Is part of a program of study that will qualify you for a new trade or business.
Tuition & Fees: Can I deduct amounts I paid for tuition and fees?
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Personal expenses. This means room and board, insurance, medical expenses (including student health fees), transportation, and other similar personal, living, or family expenses. -
Any course or other education involving sports, games, or hobbies, or any noncredit course, unless such course or other education is part of the student’s degree program or helps the student acquire or improve job skills.
Books & Supplies: Can I deduct my expenses for books and supplies?
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Room and board (however, these fees are allowed for the student interest deduction); -
Insurance; -
Medical expenses (including student health fees); -
Transportation; and -
Similar personal, living or family expenses.
Qualified Student Loan: What is considered a qualified student loan for purposes of the student loan interest deduction?
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For you, your spouse, or a person who was your dependent when you took out the loan; -
Paid or incurred within a reasonable period of time before or after you took out the loan; and -
For education provided during an academic period for an eligible student.
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A related person; or -
A qualified employer plan.
Tax Credits
What is a tax credit?
A tax credit reduces the amount of taxes you owe dollar-for-dollar. For example, if you owe $1,000 in taxes but claim a $1,000 tax credit, then your tax liability becomes $0.
Education Credits: Are there tax credits available to offset the costs of attending college?
Yes.
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Worth a maximum benefit of up to $2,500 per eligible student; -
Only for the first four years at an eligible college or vocational school; -
For students pursuing a degree or other recognized education credential; and -
Partially refundable (up to $1,000 of the credit is refundable).
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Worth a maximum benefit of up to $2,000 per tax return, per year, no matter how many students qualify; -
Available for all years of post-secondary education and for courses to acquire or improve job skills; -
Available for an unlimited number of tax years; -
This is a non-refundable credit (which means it can only help reduce your tax liability).
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Be enrolled in an eligible educational institution (i.e., a school offering higher education beyond high school); and -
Have paid qualified education expenses for higher education and received IRS Form 1098-T (Tuition Statement) from the eligible educational institution. -
However, there are exceptions if a student has not received IRS Form 1098-T (see the answers to questions 18,19 and 20 on the IRS's Education Credits: Questions and Answers).
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