Can standard deduction lower my tax bracket?
I am an independent college student, and I will be living on campus starting next semester. I am aware that only tuition and required fees are considered as qualified education expenses and that the rest of the amount going toward room and board, textbooks, and refunds are taxable.
According to my calculations, the amount of scholarships going toward room and board and refund in 2015 is going to exceed the filing threshold of ,150, perhaps around ,000. This would mean that I have to file a federal tax return. However, I heard of some things called "standard deduction" and "personal exemption." I have never filed taxes before, so I have no clue as to what effects they have on me.
My question is, will standard deduction and personal exemption bring down my number, to the point that I will not be required to file a federal tax return? If some things are unclear, or if my assumption is incorrect, please let me know. Thank you.
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The standard deduction is built into the tax forms. Just follow the instructions.
The requirement of having to file a tax return is different from the requirement of having to pay taxes. You must file a tax return if your income is above a certain amount. It may well be that when you complete all the forms, the standard deduction and the personal exemption etc
result in your tax liability for that year being zero. But that does not exempt you from the requirement that you file the tax return.
You can file a tax return if your income is below the threshold requirement for filing a tax return, and many people do so. This is
because they have had income tax withheld from wages or IRA
distributions, Social Security benefits, pensions, etc. If the calculations on the tax forms
shows that they owe less tax (possibly zero tax) than what was
withheld, the IRS will refund the difference to them. If they
don't file a tax return on the grounds that they are not required
to do so, that money is likely gone forever.
Typically,
taxes are not required to be withheld from scholarships and
the like and many institutions do not withhold taxes (but will do
so if requested). So, if taxes were withheld from your scholarship
amount because you requested this or your institution's
financial system automatically withholds taxes, you certainly should
file a tax return to get your money back.
Finally, while many States that collect income taxes base their
tax structure on the income shown on the Federal income tax
return, some States have their own rules, and so don't forget
about State tax returns, and especially if you have had State
income tax withheld.
Assuming you are in the US, in 2015 the standard deduction is 00, and exemption, 00. ,300 total. With no other credits or deductions, the next ,225 of income is taxed at 10%.
If your room and board are ,000, you are looking at under 00 taxable income and about 0 tax. This assumes you aren't working. If you are, of course that income is added on.
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