Being a recent college graduate allows me to relate to other college aged students. Being a young adult at 22 years old, I have had many friends my age come up to me and ask tax related questions such as “Do I have to file my own tax return?” and “Can my parents still claim me?”. So, let’s outline the requirements for filing, and the advantages of claiming yourself.
The requirements to file your own tax return are quite simple. First, know what category you fall into; single or married. From there we can look at the requirements for each:
Single: Your unearned income was over $1,100 (Interest income, dividends, any income received without work), Your earned income was over $12,200 (Wages, tips, any income received for doing work).
Married: Your gross income was at least $5 and your spouse files a separate return and itemizes deductions, your unearned income was over $1,100, your earned income was over $12,200.
These are the requirements to filing, meaning it is unlawful to avoid filing if any of those descriptions apply to you. However, just because you are not legally obligated to file, doesn’t mean this has to stop you from filing. There are some great advantages to filing and claiming yourself, and a generous portion of these benefits come from being a student.
Most higher education tax credits are only available to moderate income earners. For example, a parent can claim their child as a dependent and try to claim the American Opportunity Tax Credit (AOTC). According to the IRS, this credit is granted to students who are, "enrolled as half time for at least one academic period, are pursuing a degree or other recognized education credential, have not finished the first four years of higher education, have not claimed the AOTC credit for more than four years, and do not have a felony or drug conviction at the end of the year." This credit can offer up to $2,500 per student per year. But remember, there are limits to claiming this credit. According to the IRS, "to fully claim this credit, your modified adjusted gross income (MAGI) must be $80,000 or less ($160,000 or less for married filing jointly)." To receive a reduced amount, your MAGI is over $80,000 but less than $90,000 (over $160,000 but less than $180,000 for married filing jointly). Finally, you cannot claim the credit at all if your MAGI is over $90,000 ($180,000 for joint filers). This can give dependents a huge advantage over their parents, as it is more likely the student will be able to fully claim the credit due to their amount of income versus their parents.
Additionally, if you are paying on student loans yourself, you can earn a deduction of up to $2,500. Even better, you can take the deduction even if you don’t itemize! Although, keep in mind this deduction begins to phase out in the 2020 tax year once your MAGI is above $75,000 as a single filer, and above $140,000 as married filing jointly. Another huge advantage: most parents trying to claim a child, especially with those itemizing, wouldn’t be able to take this deduction due to their MAGI, and most students do not fall in the high MAGI bracket and can most likely deduct the full amount. Why don’t you plan ahead for yourself and make the decision to pay the loans off yourself? It will help you eventually when you to file independently.
One last piece of advice for all college students, even if the requirements don’t apply to you under the single or married filing discussed earlier, you can only be claimed by your parents until the age of 24 as a full-time student. If you are about to reach 24 and haven’t yet filed independently, take this advice, and begin filing this next tax year.