Why Do I Owe Taxes If I Am a Student?

The federal tax code is based on the amount you earn rather than your status. Accordingly, just because you are a student does not exempt you from paying income taxes if you earn a certain minimum amount of money during a taxable year.

Basics

• Despite the fact that you are a student, if you are single and you earn at least $9,350 in gross income in 2009, you are required to file income taxes. If you are a married student and you are filing a joint return, you and your spouse must earn at least $18,700 to be required to file taxes. Gross income is defined by the Internal Revenue Service as any income you receive in various forms, such as money, property and services. These are the two most common situations. Please be aware that whether you are required to file is also dependent on your age and your filing status (for example, whether you file separately as a married couple or if you have any dependents).

Tax Brackets

• The amount of tax you owe is determined by the amount of gross income you earn. Tax brackets in the United States are progressive, which means that the government taxes individuals who earn more at a higher rate than individuals who do not earn as much. Tax brackets are as low as a 10 percent tax and rise to 35 percent for the highest earners.

Earned Income Tax Credit

• If you are an older student (at least age 25) and you have earned income from employment, you may qualify for the Earned Income Tax Credit (EITC). The EITC is a refund of taxes for those who qualify and claim the credit on their returns, even if they do not have enough income to be required to file a tax return.

Deductions for Students

• If you are a student, you may be eligible for certain deductions if you are required to file income taxes. You may deduct the interest that you pay, if any, on your student loans, provided your income does not exceed specified levels. You may also claim a deduction for qualified education expenses and deduct up to $4,000 from your income taxes.

Credits for Students

• There are several tax credits for students who are pursuing higher education. Credits reduce the amount of your income tax dollar for dollar. The three higher education credits available to students are: the American Opportunity Credit, the Hope Credit and the Lifetime Learning Credit. You may only claim one of the three credits in each taxable year.