It’s officially tax season! Have you received a 1098-T form from Parkland and are wondering what to do with it? If you are a college student who files taxes, there’s a good chance you can benefit from one or more tax programs for students. Read on to find out how you can save some money (and maybe even get a bigger refund!)
There are two main types of tax benefits available to students: tax credits and deductions.
Tax credits reduce the amount of income tax you pay. If you are receiving a tax refund because you had excess funds taken out of a paycheck for taxes, an education credit can increase this refund. Alternatively, if you owe money for underpaid taxes, a credit can reduce or offset this balance. Tax credits are a great way to offset what you pay for school (including payments that you make with money borrowed as student loans). There are two education credits available to college students: the American Opportunity Credit (AOC) and the Lifetime Learning Credit (LLC). The AOC is available for students who are in their first four years of college (at least half time), and the LLC is available to students who may not meet the qualifications for the AOC. Students who are part time, already have a degree, or who have already used four years of AOC may benefit from the LLC.
Deductions reduce your total income for the purposes of calculating your tax bill. If you don’t qualify to receive an education tax credit, you can deduct the amount of money you paid for school (again, including money that came from student loans) from your income, which in turn will reduce the amount of income taxes owed to the government. Deductions result in proportionately smaller tax savings than credits, but can still increase your refund.
Speaking of student loans, if you made any student loan payments last year–even if you were just paying the interest accruing on an unsubsidized loan–you may be eligible for the Student Loan Interest Deduction. This allows you to deduct the amount of student loan interest paid from your income, resulting in a lower tax bill. Your loan servicer (the company that collects your student loan payments) should provide you with a statement indicating the total loan interest you paid in 2016.
For more information about each of these benefits, as well as a list of all eligibility requirements, check out this article: www.nasfaa.org/2016_tax_year.
Are you a new tax filer? Learn how to file your own taxes with SALT. Parkland has partnered with SALT, a nonprofit organization that helps student take control of their personal finances. They have informational articles, videos, and even an entire course on how to file your taxes. Get your free account at www.saltmoney.org/parklandcollege.
[Julia Hawthorne is an advisor with Financial Aid and Veteran Services at Parkland College.]