Campus Connection

We have learned from several of President Obama’s cabinet picks that filing taxes improperly can kill a politician’s credibility. So if any of you are even remotely considering a career in politics, a word to the wise: pay your taxes punctually and accurately!

Everyone dreads the months preceding April 15, but here are a few handy tips and important reminders to make all that tax paperwork less heartburn-inducing, and even lucrative. This information was compiled from the official IRS website and the financial sections on About.com and MSN.com.

What forms do I need to fill out?

Here are the basic forms that I thought would most apply to grad students. There are also additional forms that need to be filled out if you apply for a tax deduction on educational expenses, which I discuss in the next section.

No dependents: Form 1040-EZ – Income Tax Return for Single and Joint Filers With No Dependents

With dependents: Form 1040-A – Individual Income Tax Return

If you are employed: Form W-2 – Wage and Tax Statement

International students: 1040-NR-EZ – Income Tax Return for Certain Nonresident Aliens With No Dependents

Are there any benefits geared toward students?

As students at a graduate institution, we are entitled to a few important tax deductions. I’ve summarized a few below, but students should refer to Publication 970 – Tax Benefits for Education (http://www.irs.gov/publications/p970/index.html) for the details of all the following credits and deductions to make sure that they are eligible.

1) The Lifetime Learning Credit - to apply, you must file Form 8863 - Education Credits.

Students enrolled in graduate and professional degree courses, including instruction to acquire or improve job skills, are eligible for this credit regardless of the number of years they have spent in the program. This tax credit amounts to 20% of annual tuition and fees and applies up to a maximum tuition expense of $10,000 a year, meaning you can only get a maximum of $2,000 of credit per tax return. 

The Lifetime Learning Credit is available only for independent taxpayers;  students who are claimed as a dependent cannot get the credit, but their parents or whoever pays their tuition may be eligible. If the taxpayer is married, the credit may be claimed only on a joint return. If you earn a gross income of over $48,000 ($96,000 for married filing jointly), you would get a reduced credit percentage, and if you earn over $58,000 ($116,000 for married filing jointly), you are not eligible for the credit.

2) Tuition and Fees Deduction – to see if you are eligible, request Form 1098-T from www.1098T.com. You claim a tuition and fees deduction by completing Form 8917 and submitting it with your Form 1040 or Form 1040A. Remember to enter the deduction on line 34 of Form 1040 or line 19 of Form 1040A.

This deduction is beneficial for U.S. citizens who are paying tuition at an eligible institution who have an income too high to qualify for the Lifetime Learning Credit. If you earned between $58,000 ($116,000 jointly) and $80,000 ($160,000 jointly) this year, you are eligible. The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000; if you earn over $65,000 but less than $80,000, you can get $2000. Please note that the deduction does not apply to medical insurance, room and board, transportation, or other personal expenses.

3) Student Loan Interest Deduction – for the recently or soon-to-be graduated!  To help you figure your student loan interest deduction, you should receive Form 1098-E from the university or from the bank or governmental agency that issued your loan. To claim the deduction, enter the allowable amount on line 33 of Form 1040, line 18 of Form 1040A, line 32 of Form 1040NR, or line 9 of Form 1040NR-EZ.

If your adjusted gross income is less than $70,000 ($145,000 jointly) there is a special deduction allowed for paying interest on a student loan used for higher education (also known as an education loan). This deduction can reduce the amount of your income subject to tax by up to $2,500, only applies on the interest, and only kicks in once you are paying interest on the loan. 

4) Deductions on travel expenses for work-related education

If you are going to school for additional training under a job you currently have (Qualified Work-Related Education), you may be eligible for deductions for tuition, books, transportation, and other expenses. See Chapter 12 of Publication 970 for all the details and requirements for eligibility.

Do I have to pay tax on a scholarship or fellowship?

It depends on the scholarship or fellowship, and sometimes only part of your scholarship would get taxed. This is outlined in chapter 1 of Publication 970.

What are some easy services I can use to do my taxes?

Save money on hiring an accountant! If you aren’t filing more than a 1040EZ, you can use the program TurboTax for free to organize all your forms. 

What are some ridiculously important deadlines that I can’t miss?

Unrelated but important: The Free Application for Federal Student Aid (FAFSA) for the state of Maryland is due March 1, 2009. Applications can be completed online at www.fafsa.ed.gov.

Remember also that if for some reason you can’t finish your tax return by April 15, you must apply for an extension. You get an automatic extension of time to file your 2008 tax return if you file Form 4868. Filing the form gives you until October 15 to file your return. You may still receive a penalty however, so be sure to pay any taxes that are still due on April 15.

Jessica Ton is a first-year student at the School of Medicine.  

Article Tools