Students Should Understand Taxes: Many students want to work to earn money, but many don’t think or know about the taxes they must pay. Many will learn the different taxes that will be deducted from their paycheck, but when they attend college some of the money they received will be taxed also.
Here is a list of money students receive that can be taxed | Students Should Understand Taxes
Scholarships can be taxed if it is required for the student to perform a service as a condition of receiving the scholarship. They can also be taxed if used for room and board or living expenses. If a scholarship is used to pay for tuition and fees, books, or supplies, it is tax free.
Certain types of financial aid may be taxable. For instance, a work-study program is a type of financial aid that allows you to earn money. It involves working a job that correlates with your degree program. While social security and Medicare taxes do not apply to work-study income under 20 hours a week for students taking six or more credit hours, the IRS considers this taxable income because the student is not required to spend the money on school expenses. The only time work-study income is not taxable is if the job is at certain government agencies, health programs, or non-profits.
If the student is unsure about whether they will be taxed, they should reach out to a financial aid office or a professional tax preparer. Make sure students keep records of all of their financial aid, work-study income, part-time income, and any school-related expenses.
Working to get an education is manageable, but it may require some outside help to understand what affect it will have on your taxes. Make sure students are proactive and know what to expect beforehand, so there are no surprises come tax time.