Holding a job usually means filing a tax return, and that return is where education credits are claimed. Read on for the two main credits, who claims them in a family, and where to get free help filing.
The two education credits
The American Opportunity Tax Credit covers the first four years of college. It requires enrollment at least half-time for at least one academic period in the tax year, and part of the credit can be refunded even if you owe no tax. That refundable part matters to students whose paycheck withholding already covers their bill.
The Lifetime Learning Credit has no half-time requirement and no limit on the number of years. It can apply to a single course taken to build job skills, which suits working students who take one class at a time. It reduces tax owed but does not produce a refund on its own.
Who claims the credit
Only one person can claim a credit for your expenses. If a parent can claim you as a dependent, the credit belongs on that parent's return, even when you paid the tuition from your own wages. Talk with your family before either of you files.
Both credits cannot be claimed for the same student in the same year, and expenses already paid with tax-free grants, scholarships or employer help do not count. Your school sends Form 1098-T early in the year, and the IRS website explains which amounts on it you can use. Income limits apply to both credits and are set each year.
It can apply to a single course taken to build job skills, which suits working students who take one class at a time.
The credit for low and moderate pay
The Earned Income Tax Credit is aimed at people who work and earn low to moderate pay. Its rules on age, income, children and student status are published by the IRS, and they differ for people with and without children. Younger students without children often fall outside its age rule, so check the IRS rules before counting on it.
Some states offer their own earned income credit on top of the federal one, with separate rules. Your state tax agency publishes them.
Free help with the return
Volunteer Income Tax Assistance sites prepare returns at no cost for people with low to moderate incomes, and many are on or near college campuses. IRS Free File lets people under an income limit file a federal return online at no charge.
Check your W-4 at work as well. If too little tax is withheld from your paychecks, a credit may shrink a bill rather than produce a refund.
Steps to take
- Find your Form 1098-T in your student account
- Ask your parents whether they plan to claim you
- Look up a Volunteer Income Tax Assistance site near you
- Review the withholding on your W-4
Who decides
The IRS website or a Volunteer Income Tax Assistance site
The tax return your job brings is where education credits are claimed, and only one person can claim them for your costs.