Many college students have a very limited income. A college student relies on student loans, grants and other sources to pay for college. He may be concerned about whether or not to pay taxes on the student loan money he receives during the year. A college student needs to check with his parents before they file their taxes, especially if the parents are paying for a large portion of his expenses.
Student loans are not considered income when filing taxes. A college student does not need to report student loans received as part of his taxes. However he can claim the interest he paid on the student loans as a deduction through the year. If the student is currently making interest only payments he may qualify to deduct those payments as long as he is not still a dependent on his parents’ taxes.
Before you file your taxes you need to consult with your parents to see if they are still claiming you as a dependent. If your parents are paying the majority of your college and living expenses, then they will likely want to claim you as a dependent and take advantage of the tax credits available for college expenses. If you are paying for college on your own you should claim yourself and not let your parents claim you as a dependent. You can take advantage of the education tax credits.
Needing to File
You do not need to file your taxes as a dependent if you made less than $5,700 or earned less than $950 in interest. If no one claims you as a dependent then the limit increases to $9,350. However you may want to file your taxes, because you could be entitled to a refund. If you work full time over the summer, the job will take out taxes at the same rate as if you were working full time all year. If you decide to file even though you do not need to by law, you will qualify for free file, which allows you to file your taxes electronically for free.
Any money you earn at a job is considered taxable income. However, if you receive assistantships, scholarships and fellowships, that money may be considered taxable as well. Any money you receive in excess of the cost of tuition and books is considered taxable income and needs to be reported on your taxes. Pell Grants are excluded as taxable income.