Student Tax and Education Credits for 2008

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Tuesday, 10 February 2009

By Angela Stringfellow  Even if you are currently a student you may have to file a tax return in 2008. For example, if you were self-employed for a part of the tax year and earned more than $400.00 during that self-employment, you will be required to file a federal tax return and pay the necessary self-employment tax (Social Security/Medicare). You may be required to pay Medicare and Social Security tax on tips that you did not report to your employer or if you worked for a church or church-controlled organization that was exempt from those taxes. There are many types of income that students sometimes receive that qualify as taxable income. Some of this income may include: Payment for services performed, Money received through self-employment, Money received through investments, and Some scholarships and fellowships Allowances received through the Reserve Officers Training Corps are tax-exempt, but payments made over the summers qualify as taxable income. Foreign students who are resident aliens may be subject to some of the same tax laws as U.S. citizens. There are many credits available for students to offset the cost of education. The Hope Credit: This credit applies for the first two years of post-high school education, such as college or vocational school. It does not apply to any year after that. You can claim up to $1,650 per eligible student, per year. The credit covers 100% of the first $1,100 of qualified tuition and related fees paid during the tax year, plus 50% of the next $1,100. Every student applying for the credit must have been enrolled in the education program at least half time during an academic period during the tax year. The Lifetime Learning Credit This credit applies to undergraduate, graduate, and professional degree courses, even courses that are job related . Your credit equals 20% of the first $10,000 of post-high school tuition and fees you pay during the year, not to exceed $2,000. You may not apply for both credits for the same student in the same year. If you have graduated and started to pay back your student loan, you may be able to deduct some of the interest paid on your student loans (including the one time loan origination fee charged by your lender). Also, you may be able to claim a deduction for qualifying tuition and fees paid during the tax year for you, yourself, or a dependent. There are certain scholarships and grants that fall under the category of taxable income. The IRS warns that generally there is a 14%-30% withholding on taxable grants, fellowships, and scholarships. To learn more about tax exemptions and find tax tips to help you maximize your tax savings, visit http://www.efile.com/taxes-exemptions.asp. Estimate your federal taxes free at http://www.efile.com/tax-calculator. Online Schools Share Your Opinion. (0 posts) Tag it:

Last Updated ( Tuesday, 10 February 2009 )

 

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