Not all students are required to file taxes. However, there are instances where it may benefit you to report student loans.
Are students required to file taxes?
Your student loans do not count as income. Scholarships, fellowship money, and other resources given to you for school are not taxable. The taxable portion of the funds would be expenses such as travel, room and board, or optional expenses.
Tax Breaks for student loans
There are two types of credit that you may qualify for when you file: American Opportunity credit, or Lifetime Learning credit. Paying for education expenses is one of the qualifying factors in being eligible for education tax credit.
Qualifying costs include paying for books and tuition with a student loan. You can track your qualified expense payments through Form 1098-T, which is provided by your school. This form is simply a tuition statement.
Does filing jointly affect your student loans?
The short answer is, yes. Filing jointly can potentially increase or decrease your student loan payments. This is because repayment plans are income-driven, so they heavily rely on your filing status. The adjusted gross income in your tax return is used to calculate your payments.
Is there tax debt relief for students?
For complicated tax situations, it’s always best to work with a professional when you file. Selecting the wrong deductions or reporting your non-taxable income incorrectly can put you at risk for penalties. Over time, IRS penalties accrue interest, and a tax liability is the last thing you need to worry about on top of repaying education debt.
Optima assists clients with unmanageable tax debt find relief and remain compliant with the IRS. If you received a notice, give us a call for a free consultation at (800) 536-0734.