I started college this year. I am an independent student ( I do not live with my parents). Our family is low income, and we get a much needed sizeable tax return every year. I’m wondering how my federal student aid will effect our tax return. Will it raise or lower it? Thanks!
I know that I am an independent student. I’m 25 years old, married, with 3 kids.
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For tax purposes, the IRS does not use the word “independent.” FAFSA does, but not until you are 24.
You are considered to be temporarily away at school.
Scholarship money that is used for tuition is a non-issue.
Scholarship money used to pay room and board is taxable and support you provided yourself.
Loans that *you* will pay back are not taxable, but support you provided yourself.
See the support test worksheet in irs publication 501, page 20. If you supported yourself, you will not be your parents’ dependent. If you don’t and are a full time student, you will still be a dependent.
I was surprised by how much I got back last year and I am student as well. I claimed head of household and I have a child (that may be why) and I did not make too much over 30k last year… I ended up getting like 4k in taxes back and only paid like 1/4 of that in… Just remember to save receipts for any school property you purchased out of pocket: laptops ect. and you should be refunded for that as well (I just found that out lol)… Good luck!
If you paid tuition out of your own pocket, including using loan proceeds, it may help reduce your tax liability and/or increase your refund. The only time that it would negatively affect your tax position would be if you had excess grants or scholarships that were used for other than allowable educational expenses and were therefore taxable.
BTW, you don’t “get” a “sizeable tax return” you FILE a tax return. A tax return is the forms and schedules that you file with the IRS. Any money that you get back after you file your tax return is a REFUND.
For more information on the education tax benefits, see IRS Pub 970 http://www.irs.gov/pub/irs-pdf/p970.pdf .