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Top 5 Taxation Matters To Consider For Students

Top 5 Taxation Matters To Consider For Students

Did you know that students have their own set of tax laws?

In college, there are different tax rules that apply. Take a look at some of these tax laws that apply specifically to students:

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I. Native Students

If you are a US resident, you will have a base tax of 14 percent on everything you make while in college. Scholarship money is often subject to this tax as well. Most students are still on their parent’s taxes, so it is important to discuss the potential tax with your parents to avoid shock during tax time.

Fellowship funds used for books, school fees, and tuition are exempt from the tax. Any salary earned from the school, including financial aid, will be taxed using a standard W-2 income tax form.

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II. International Students

International students must also pay taxes on the salaries that they earn. You may also be eligible for US tax exemptions on fellowship stipends or assistantship salaries, but only if your home country has an existing tax treaty with the United States. If you meet the residency requirement, you will be taxed as a US citizen. You must stay in the country for 31 days each year or over 183 days over a three-year period.

III. Tax Deductions and Education Credits

Whether you are a native resident or not, you could be eligible for the following tax deductions and credits:

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American Opportunity Credit:

This credit gives up to $2,500 per year for each student enrolled in higher education for 4 years. Whoever is filing taxes can receive this credit, but students and parents cannot claim the credit for the same student.

Coverdell Education Savings Accounts:

This account is a custodial account set up to pay for college expenses. The point of the account is to allow a student to get tax free distributions to pay for qualified education expenses. Owners of the account can pay up to $2,000 per year into the accounts.

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Education deductions:

You can also deduct certain education expenses from your taxes each year. These deductions can include the cost of transportation to school, any equipment purchased for school, accrued fees, and a variety of others.

IV. Forms to File

As a US citizen, you must file federal Form 1040 for your taxes and any required forms by your state. As a non-US resident, you must file federal Form 1040-NR and any required state forms. Some states may consider non-native students residents for tax purposes and others may not. California, for example, taxes non-natives as residents.

V. Preparing for Employment Taxes

After you leave college, you will be taxed at a different rate. If you are currently still enrolled in school while working, you will be taxed at the student rate. If you have left school, however, you will be taxed at the standard personal income tax rate, which is between 15 and 39 percent.

Tax laws can be confusing, but if you are a student, you will receive many tax benefits that you cannot get at any other time. Discuss the changes with your parents and a qualified tax accountant to ensure you are reporting your education expenses correctly and filing the correct forms.

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Simon Andras

Simon is an entrepreneur who blogs about lifestyle.

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Last Updated on January 21, 2020

How to Develop a Millionaire Mindset in 6 Simple Steps

How to Develop a Millionaire Mindset in 6 Simple Steps

We all like to dream about being financially wealthy. For most people though, it remains a dream and nothing more. Why is that?

It’s because most people don’t set their mind to achieving that goal. They might not be happy in their current situation but they’re comfortable – and comfort is one of the biggest enemies of growth.

How do you go about developing that millionaire mindset? By following these simple steps:

1. Focus On What You Want – And Take It!

So many people are too timid to admit they want something and go for it. When there is something that you want to accomplish don’t think “I could never actually do that”, think “I could do that and I WILL do that”.

Millionaires play to win, not to avoid defeat.

This doesn’t mean to have to become a selfish jerk. What it means is becoming more assertive and honest with yourself. You don’t have to grab off other people. There is a big pot of unclaimed gold in the middle of the table — why shouldn’t you be the one to claim it? You deserve it!

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2. Become Goal-Orientated

It’s almost impossible to achieve anything if you don’t set firm goals. Only lottery winners become millionaires overnight. By setting yourself attainable goals, you will get there eventually. Don’t try to get rich quickly — get rich slowly.

Let’s take the idea of making your first million dollars and expand on what kind of goals you might set to get there. Let’s also say you’re starting at a break-even position – you’re making enough to get by with a few luxuries, but nothing more.

Your goal for the first year can be having $10,000 in the bank within a year. It won’t be easy but it is doable. Next, you need to figure out the steps you need to take to achieve that goal.

Always look at ways to make growth before cutbacks. With that in mind, you might want to see if you can negotiate a pay rise with your boss, or if there’s another job out there that will pay better. You might be comfortable in your old job but remember, comfort stunts growth.

You may also have other skills outside of your workplace that you can monetize to boost your bank balance. Maybe you can design websites for people, at a fee of course, or make alterations to clothes.

If this is still not enough to make the money you need to save $10,000 in a year, then it’s time to look at cutbacks. Do you have a bunch of old junk that someone else might love? Sell it! Do you really need to spend $10 on your lunch everyday when you could make your own for a fraction of the cost?

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If you are to become a millionaire, you need to start accumulating money.

Here’re some tips to help you: How to Become Goal Oriented and Achieve More in Life

3. Don’t Spend Your Money – Invest It

The reason you need to accumulate money is for step three. Millionaires tend to be frugal people, and that’s because they know the true value of money is in investing. Being your own boss goes hand-in-hand with becoming a millionaire. You’ll want to quit your regular job at some point.

Stop working for your money and make your money work for you.

Rather than buying yourself a new iPad, that $500 could be used to invest in the stock market. Find the right shares (more on that later), and that money could easily double within a year.

There’s not just the stock market — there’s also property, and your own education.

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4. Never Stop Learning

The best thing you can invest in is yourself.

Once most people leave the education system, they think their learning days are over. Well theirs might be, but yours shouldn’t be. Successful people continually learn and adapt.

Billionaire Warren Buffet estimates that he read at least 100 books on investing before he turned twenty. Most people never read another book after they’ve left school. Who would you rather be?

Learn everything you can about how economics works, how the stocks markets work, how they trend.

Learn new skills. If you have an interest in it, learn everything you can about it. You’d be surprised at how often, seemingly useless skills, can become extremely useful in the right situation.

Start developing the habit of learning continuously: How to Create a Habit of Continuous Learning for a Better You

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5. Think Big

While I advise to start off with small goals, you absolutely should have a big goal in mind. If you have a business idea, then that is your ultimate goal – to start that business and make a success of it. If you want to invest your way to millions of dollars and do little work other than research, then that is your big goal.

There is no shame in not achieving a big goal. If you run a business and aim to make $1 million profit in a year and “only” make $200,000, then you’re still significantly ahead of most people.

Aim for the stars, if you fail you’ll still be over the moon.

6. Enjoy the Attention

To be successful, you have to be willing to promote yourself and enjoy the attention to a certain extent. Now the attention doesn’t need to be on yourself, it could be on your brand, but attention definitely attracts money.

Never be embarrassed to get your name out there. That means finding a spotlight and being brave enough to step right up underneath it.

If you run a business, try contacting the local papers. You’d be surprised at how amenable they often are to running a story about you and your business, and it’s all free publicity.

Above all, remember: You control your own destiny. Push hard enough for anything and you’ll get it.

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Featured photo credit: Austin Distel via unsplash.com

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