(U-WIRE) – In the time it takes students to walk to class, they could get back thousands of dollars of the money they spent on college-related expenses every year, meaning more money for clothes, going out and food.
There are two types of tax deductions and two types of tax credits available to college students, Liz Kennedy, director of public relations for Upromise Investments, a subsidiary of Sallie Mae, said.
“The last thing you want, particularly after paying for college, is to pay more taxes than you should,” she said.
Tax credits are subtracted from the total amount of income earned, while tax deductions are used to lower the amount of income that taxes must be paid on, Kennedy said.
“However, while all these tax benefits are out there, not everyone is claiming them,” Kennedy said.
A study done by the Sallie Mae Corporation, which is a student loan provider, found 46 percent of students did not know they could save money with options like the Student Interest Loan Tax Deduction, she said.
In addition, the Government Accounting Office found 27 percent of the people eligible for these tax deductions and credits in 2005 did not claim them, Kennedy said. She said it is estimated that each of them would have saved an average of $169, and 10 percent of those people could have saved $500 or more.
Internal Revenue Services Spokeswoman Pat Brummer said she recommends college students file their taxes for free through the IRS’s Web site. The service lets people choose which of 19 companies to file with, Brummer said.
The IRS and taxpayers prefer electronic submission because of its accuracy and quick refund return, she said. Its error rate is less than 1 percent, as opposed to paper filing which has an error rate of 20 percent, she said.