What taxes are applicable to students in the US?

Taxes can be a confusing area for students, and they may not know exactly what they must pay and what they are exempt from paying. As an international student in the US, it can be even more confusing as tax laws differ from country to country. However, fear not, as this quick guide will break down everything that you need to know about the taxes applicable to students in the US.

Resident students 

When thinking about taxes as a resident US student, it’s most important to consider your employment status and overall income. Regardless of your student status, if your annual income surpasses the tax threshold, you will be required to pay income tax. This means you must file the same federal tax return as all other US taxpayers, reporting all of your income, wages and any scholarships or grants received as income. Depending on the amount you earn, you may be required to file a state tax return as well; this varies from state to state, so be sure to understand your state’s tax laws before starting your course. 

International students

If you were studying in the US at any point during the previous year, as an international student, you are obliged to file a tax return. There are lots of different sources of income that are taxable, including salaries, tips and prizes or awards. The rate of tax you are obliged to pay will depend on the level of your income and the tax bracket you’re in. Even if you didn’t earn any additional income while at college, you still need to complete a tax return as an international student.

Generally speaking, scholarships and grants are tax-free, provided the money is used for educational purposes and you attend a college with a regular faculty and curriculum. Primarily, as an intentional student, it’s important to complete your return on time in order to meet your visa requirements. 

Tax benefits available to students 

As a student in the United States, you may be eligible for some tax benefits, such as education tax credits. These credits are intended to help offset the cost of higher education and can be quite substantial, so it’s well worth reading up on the options available to you. The two primary education tax credits available for students in the US are the American Opportunity Tax Credit and the Lifetime Learning Credit, which provide up to $2,500 and $2,000 of tax relief, respectively. 

To sum up

Taxes can be an intimidating topic for anyone, and staying on top of them is unlikely to be top of your list of priorities as a student. But it’s crucial to know exactly what you need to pay and what benefits you are eligible for, to help you stay on top of your finances whilst studying. By understanding the tax laws applicable to students in the US, whether you’re a resident or visitor, you can better manage your financial obligations and potentially save money through tax credits. If you are still uncertain about what taxes apply to you, reach out to your college’s financial aid office or consult a tax professional for guidance.