Tax tips for college students and their parents

FILE – Students cross the campus of Dartmouth College, March 5, 2024, in Hanover, N.H. While tax pros say it’s great for college students to start filing their own forms, parents and students should double-check everything carefully before anyone pushes the “submit” button. (AP Photo/Robert F. Bukaty, File)

There are lots of things college students and their parents should keep in mind before filing their taxes, and while tax pros say it’s great for college students to start filing their own forms, parents and students should double check everything carefully before anyone pushes the “submit” button.

Be clear on who is a dependent

For dependent students filing taxes for the first time, it’s easy to overlook checking the “dependent” box, and they cannot then be claimed on their parents’ tax forms without the long and arduous task of amending the return merely for failure to check a box.

“College students need to be very careful that they understand whether or not their parents are eligible to claim them as a dependent,” says Tom O’Saben, director of tax content and government relations at the American Association of Tax Professionals. Merely not claiming a dependent does not make that taxpayer independent, he says.

Claim all eligible college and other education tax credits

There are two kinds of education tax credits. The American opportunity credit is for up to $2,500 a year (based on at least $4,000 spent on tuition, books and fees) for the first four years toward an undergraduate degree.

The second, a lifetime learning credit, can be used toward an undergraduate, graduate or professional degree and is for up to $2,000 (based on 20% of qualified education expenses.) A parent cannot claim both for the same dependent child (or a student can claim it) on a return for the same year, but if there are multiple dependents on the return they could be using either of the credits (but not both at the same time) for each student.

Double check that all forms are in hand

While most tax-related forms arrive dependably in the mail, college students tend to work multiple jobs each year, and some college tax forms may need to be printed out from the college portal and are not mailed at all. So before filing, make sure your dependent student has confirmed that all tax forms are in for all jobs worked, and they’ve checked with the college for any additional tax forms.

Be clear about state residency

If a student is paying at least half of their own costs and is planning on claiming in-state tuition at their college in a state other than the one in which their parents live, they might want to check with the college financial aid office about residency requirements, O’Saben says.

In some cases, claiming your child as a dependent might not be the best move once the entire financial picture is taken into account.

“Just providing an address in the state your child’s college is in may not be enough to claim in-state tuition,” O’Saben says.

Make sure your college student files, if needed

Sometimes college students are still required to file their own return even if their parents claim them. Students and parents should check the rules for dependent filing and determine if the student is required to file their own return based on their gross income, says Kathy Pickering, chief tax officer at H&R Block.

Make the most of your 529 account

Qualifying distributions from a 529 account are tax-free and are not included in the child’s income, Pickering said. And while only eligible tuition, fees and books are included in the tax credit calculations, for 529 accounts, room and board are also included as eligible for withdrawals.