Student Tax Filing: Credits, Deductions & Free Options

Learn how education credits can put money back in your pocket, plus which free filing options are available to students.

Many students are surprised to learn they need to file a tax return or that filing can actually put money back in their pocket. If you had income from a part-time job, internship, freelance work, or investment earnings, you likely need to file. Even if you are not required to file, doing so may get you a refund of taxes withheld from your paycheck.

Education tax credits are among the most valuable benefits available to students and their families. The American Opportunity Tax Credit is worth up to $2,500 per year for the first four years of college, and 40% of it is refundable, meaning you can receive up to $1,000 even if you owe no taxes. The Lifetime Learning Credit covers graduate school and continuing education.

Students should also be aware of the student loan interest deduction, which allows you to deduct up to $2,500 in interest paid on qualified student loans. Scholarships and grants used for tuition are generally tax-free, but amounts used for room and board are taxable. Understanding these rules early helps you make smart financial decisions throughout your academic career.

Key Deductions & Credits

American Opportunity Tax Credit

$1,000 - $2,500

Up to $2,500 per student for the first four years of undergraduate education. Covers tuition, fees, books, and required course materials. 40% refundable up to $1,000.

Lifetime Learning Credit

$500 - $2,000

Up to $2,000 per tax return for any post-secondary education, including graduate school, professional degrees, and courses to improve job skills. No limit on years claimed.

Student Loan Interest Deduction

$300 - $625

Deduct up to $2,500 per year in student loan interest paid. This is an above-the-line deduction available even if you do not itemize. Income phase-out applies.

Tuition and Fees on Scholarships

Varies by scholarship amount

Scholarships and fellowships applied to qualified tuition and required fees are excluded from taxable income. Only amounts covering room, board, or non-required expenses are taxable.

Forms You May Need

Form 1098-T — Tuition Statement

Form 8863 — Education Credits

Form 1098-E — Student Loan Interest Statement

Form W-2 — Wage and Tax Statement (from part-time jobs)

Form 1040 — U.S. Individual Income Tax Return

Filing Tips

File a return even if you are not required to. If federal taxes were withheld from a part-time job, you may be owed a refund.
Coordinate with your parents on who claims education credits. The person who claims you as a dependent gets to claim the credit.
Keep your Form 1098-T from your school and compare it against actual payments. The form may not reflect all qualified expenses you paid.
Use free filing options through IRS Free File, Cash App Taxes, or your school's Volunteer Income Tax Assistance (VITA) program.
Track expenses for books and required course materials separately, as these qualify for the American Opportunity Credit even if not paid to the school.
If you have a fellowship or assistantship, check whether taxes were withheld. Stipend payments often have no withholding, requiring estimated tax payments.

Common Mistakes to Avoid

Not filing a return when taxes were withheld from a part-time job, leaving a potential refund unclaimed.
Claiming the American Opportunity Credit and having a parent claim it too, which triggers duplicate claim rejections.
Assuming all scholarship income is tax-free when amounts used for room and board are actually taxable.
Forgetting to report income from side gigs, tutoring, or online sales that did not generate a W-2 or 1099.
Missing the student loan interest deduction because the lender sent Form 1098-E to an old address.

Recommended Software

Cash App Taxes is completely free for all tax situations including education credits and student loan deductions, making it the ideal choice for students on a tight budget.

Review Cash App Taxes

FAQ

Do I need to file taxes as a college student?

You need to file if your gross income exceeds the filing threshold ($14,600 for single filers in 2025) or if you had net self-employment income over $400. Even below these thresholds, file to get back any withheld taxes. You must also file if you owe special taxes like the additional tax on an IRA distribution.

Can my parents claim education credits if I file my own return?

Yes. If your parents claim you as a dependent on their return, they can claim the education credits. You cannot claim these credits on your own return when someone else claims you as a dependent, but you can still file to get back withheld taxes.

Is my scholarship taxable?

Scholarship money used for qualified tuition and required fees is tax-free. However, amounts allocated to room, board, travel, or optional equipment are taxable income. If your scholarship exceeds qualified education expenses, the excess is taxable.

What is the difference between AOTC and Lifetime Learning Credit?

The AOTC is worth up to $2,500 per student, is partially refundable, and is limited to the first four years of undergraduate education. The LLC is worth up to $2,000 per return (not per student), is nonrefundable, but can be claimed for graduate school and unlimited years.