In the time it takes students to walk to class, they could get back thousands of dollars of the money they spent on college-related expenses every year, meaning more money for clothes, going out and food.
Ball State University students can save on their taxes this year through deductions and credits most don't even know about.
There are two types of tax deductions and two types of tax credits available to college students, Liz Kennedy, director of public relations for Upromise Investments, a subsidiary of Sallie Mae, said.
"The last thing you want, particularly after paying for college, is to pay more taxes than you should," she said.
Tax credits are subtracted from the total amount of income earned, while tax deductions are used to lower the amount of income that taxes must be paid on, Kennedy said.
"However, while all these tax benefits are out there, not everyone is claiming them," Kennedy said.
A study done by the Sallie Mae Corporation, which is a student loan provider, found 46 percent of students did not know they could save money with options like the Student Interest Loan Tax Deduction, she said.
In addition, the Government Accounting Office found 27 percent of the people eligible for these tax deductions and credits in 2005 did not claim them, Kennedy said. She said it is estimated that each of them would have saved an average of $169, and ten percent of those people could have saved $500 or more.
Internal Revenue Services Spokeswoman Pat Brummer said she recommends college students file their taxes for free through the IRS's Web site. The service, Free File, is accessed from the main page of the IRS Web site and is available to taxpayers with an adjusted gross income of $52,000 or less, she said. The service lets people choose which of 19 companies to file with, Brummer said.
The IRS and taxpayers prefer electronic submission because of its accuracy and quick refund return, she said. Its error rate is less than one percent, as opposed to paper filing which has an error rate of 20 percent, she said.
Brummer also said students should be aware of the Telephone-Tax Refund, which reimburses long distance charges on landline and cell phones.
IMPORTANT SIDE STORY STUFF
Tuition and Fees Tax Deduction
The Tuition and Fees Tax Deduction allows eligible college students to reduce their taxable income by up to $4,000, Kennedy said, depending upon how much money the taxpayer, taxpayer's spouse or taxpayer's dependent paid for college tuition and other enrollment costs. For example, if $3,000 were paid in tuition-related fees, the student (or the student's parents, if the student is filing as a dependent) would be able to deduct $3,000 from the taxable income.
A 1098T form, which should be sent to the payer by the university, would show the amount paid in the prior year, Kennedy said.
To take this deduction, a single taxpayer must have an income of less than $65,000, and a married couple filing jointly must earn a combined income of less than $130,000, she said.
Student Loan Interest Tax Deduction
The Student Loan Interest Tax Deduction may lower the income students must pay taxes on by $2,500 matching the interest they paid on their student loans in the prior year, Kennedy said.
If taxpayers paid more than $600 on student loans, their student loan providers will send them a 1098E form stating exactly how much interest they paid, she said.
To be eligible for this deduction, a single taxpayer must earn less than $50,000, and a married couple filing jointly must have a combined income of less than $105,000, Kennedy said.
When claiming either of these deductions, taxpayers are not required to itemize their deductions, she said.
Hope Scholarship Tax Credit
The Hope Scholarship Tax Credit is only open to freshmen, sophomores or parents who claim those students as dependents, Kennedy said. Taxpayers can only file it twice in their life and must be enrolled at least part-time in a degree or certificate-awarding institution, she said. Students also cannot have any felony drug convictions in the past year.
This tax credit allows taxpayers to deduct all of the first $1,100 paid for tuition and other required fees and half of the second $1,100 spent, Kennedy said. For example, if one paid at least $2,200 in expenses, one could take a tax credit of $1,650.
Single taxpayers must have incomes less than $45,000, and married couples filing jointly must have combined incomes less than $90,000, she said.
Lifetime Learning Tax Credit
The Lifetime Learning Tax Credit may pay up to $2,000 of any college or graduate student's college expenses, or anyone's college level courses, Kennedy said. This tax credit gives back 20 percent of the first $10,000 or less the person spends on college fees, she said. For example, students who spend $5,000, would receive tax credits of $1,000.
To claim the Lifetime Learning Tax Credit, single taxpayers must earn less than $45,000, and married couples filing jointly must have a combined income of less than $90,000, she said.
Read More
Three Air Jam teams take home the win
October 12, 2012Nineteen teams shimmied, shook and flipped for a sold out John R. Emens Auditorium on Thursday night during the 25th annual Air Jam.
Bill Clinton Speaks at North Central High School
October 12, 2012Former President's Speech Could Have Effect on State Senate Race
