Do college students have to file a tax return? See if you’re required, and why you may want to even if you’re not

If you make enough money, the Internal Revenue Service will require you to file a tax return. Many college students, who aren’t exactly known for their big salaries, might not earn enough to need to.

But even those who don’t make enough money to be legally required to file might want to send in a return. Why? A refund could be coming your way.

Below, find out if you need to file taxes this year and why you might want to anyway.

2022 federal income tax return requirements 

Before you file, you’ll need to know your status. If anyone, such as your parents, claims you as a dependent on their taxes, you are able and may still be required to file a return. It’s a good idea to discuss that with your parent or guardian before filing.

According to the IRS, if you are a dependent who is unmarried, under 65 and not blind, you must file a tax return if:

  • Your unearned income (which includes taxable interest, capital gain distributions, unemployment compensation and taxable Social Security benefits) was more than $1,150
  • Your earned income was more than $12,950
  • Your gross income (total earned and unearned) was more than the larger of: $1,150 or your earned income (up to $12,550) plus $400

If you won’t be claimed as a dependent on someone else’s taxes, you must file a return if you made over $12,950 in 2022. For taxpayers under 65, that threshold goes up to $25,900 if you’re married and filing jointly, but married couples filing separately are required to file if they make over $5.

College students in particular may want to double-check their taxable income — some portion or all of a scholarship or grant can be taxable if it’s used for incidentals, including room and board or travel. 

Why you may want to file a tax return anyway

“This is a great introduction to adulthood,” Holly Reid, a certified public accountant who specializes in financial education for young people, tells CNBC Make it. “[College students] have been asking for more independence, so it’s definitely something I would encourage all college students to do, one: so they can be exposed, see what the questions are, but two: they never know if they may receive a tax refund.”

Even if you’re not legally obligated to file a tax return, the IRS recommends doing so anyway if you had income tax withheld from your earnings, because you may be entitled to a refund. 

Filers earning between $1 and $5,000 received an average $278 refund for the 2019 tax year, according to a Motley Fool analysis of IRS data. The average refund was $911 among those earning between $5,000 and $10,000 the same year. 

Other situations, such as having a child or qualifying for the Earned Income Tax Credit (EITC), may add incentive for you to file a tax return, if they apply.

Tax credits reduce your tax liability, or the money you owe the IRS. Some are partially or totally refundable, meaning if you reduce your tax liability to zero, but are eligible for a refundable credit, you can get that amount paid out. For example, if you qualify for a $2,000 fully refundable credit like the EITC, but you owe $1,000 in taxes, you may received a $1,000 refund.

Unfortunately, filing your taxes might mean you find out you owe money. But it’s better to find that out sooner rather than later. “We don’t want them to get into a situation where they haven’t been filing and then have to face some kind of penalties later on in life,” Reid says. 

What to do with your tax refund

For college students strapped for cash, a tax refund check could be the lifeline needed to pay for tuition, books or even groceries. But if your basics are covered and you have a bit more freedom to spend your tax refund, consider how it could help you move closer to financial independence.

While it might be tempting to blow a couple hundred dollars on a spring break trip or concert tickets, it’s not a bad idea to hold onto some or all of that cash in an emergency fund for when you absolutely need it.

“I would recommend that they hold on to [their refund money] for at least 30 days and really think through how to best utilize the money,” Reid says.

If you don’t have an investment account yet, you’re probably not alone — many consumers don’t start investing until they’re well into their 20s or 30s. But college is a great time to start investing because the sooner you start, the more time your money has to grow, thanks to compounding returns.

Of course, investing in the stock market or other volatile assets comes with a certain level of risk, so do your homework first.

You can also use your tax refund to make an extra payment toward your credit card debt or student loans. It might not be enough to wipe out a balance, but an extra payment here and there can help you save on interest and get out of debt faster.

If it’s your first time filing, “don’t be intimidated,” Reid says. There are plenty of reputable tax apps and websites that will walk you through the process, along with organizations that offer free expert tax advice.

The IRS hosts a Volunteer Income Tax Assistance (VITA) program where individuals who meet certain qualifications — like earning less than $60,000 — can get help with their taxes for free. You can use the IRS locator tool to find a VITA site near you.

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