Lori Meadows
Students are not automatically exempted from paying income taxes. Their tax liability depends on several factors, including their income, age, filing status, and dependency status. If a student's income is below the filing requirement for their specific circumstances, they typically do not owe income tax and are not required to file a tax return. However, students may still choose to file a tax return if they are entitled to a refund of withheld income tax or if they are eligible for certain credits or deductions. Additionally, international students from countries with tax treaties with their country of study may be eligible for partial tax exemptions. Students in specific positions, such as teaching or graduate assistants, may also qualify for certain tax exemptions under specific conditions.
Are students exempted from paying income taxes?
| Characteristics | Values |
|---|---|
| Student FICA tax exemption | Applicable only to employment during school breaks of five weeks or less |
| Student FICA tax exemption eligibility | Must be eligible on the last day of classes in the academic period preceding the break |
| Student FICA tax exemption eligibility | Must be eligible to enroll in classes following the break |
| Student FICA tax exemption | Applicable to services performed between the fall and spring semesters |
| Student FICA tax exemption | Applicable to teaching assistant and graduate assistant positions |
| Student FICA tax exemption | Applicable to students enrolled for less than half-time, if required to complete the degree program |
| Student FICA tax exemption | Applicable to graduate students enrolled full-time and working on campus |
| Student FICA tax exemption | Applicable to students enrolled for six or more credits and working on campus during the academic year |
| Student FICA tax exemption | Not applicable to postdoctoral students, postdoctoral fellows, medical residents, and medical interns |
| Student FICA tax exemption | Not applicable if the student worker has multiple appointments, including one that confers professional, career, or full-time employee status, or provides certain employee benefits |
| Student FICA tax exemption | Applicable to international students from a country with a tax treaty with the US |
| Student exemption from federal income taxes | Not applicable, based on income levels |
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What You'll Learn
Full-time students are not exempt from federal income taxes
Every US citizen or resident must file a US income tax return if certain income levels are met. This means that full-time students are not exempt from federal income taxes. However, if a student's income is below the filing requirement for their age, filing status, and dependency status, they will not owe income tax on that income and will not have to file a tax return. Even if they are not required to file an income tax return, they may choose to do so if they are entitled to a refund of withheld income tax or if they are eligible for a refundable credit.
Students in employee positions may be eligible for a FICA tax exemption. The student FICA tax exemption applies only to employment during school breaks of five weeks or less. To qualify for the exemption, students must be eligible for exemption on the last day of classes in the academic period preceding the break, and they must also be eligible to enrol in classes following the break. Services performed between the fall and spring semesters are generally eligible for the FICA exemption. Additionally, graduate students who are enrolled in an academic semester with full-time certification and who are working on campus are exempt from FICA deductions.
The law specifically disqualifies postdoctoral students, postdoctoral fellows, medical residents, and medical interns from student FICA exemption eligibility because the services performed are not for the purpose of pursuing a course of study. During any semester or summer when a student worker has multiple appointments—at least one of which confers professional, career, or full-time employee status or provides certain employee benefits—FICA taxes will be withheld from all earnings, and no exemption will be allowed.
International students are subject to both federal and state income taxes. However, if they are from a country that has a tax treaty with the United States, they may be eligible to exempt a portion of their earnings from taxes.
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International students are subject to federal and state income taxes
Generally, full-time students are not exempt from federal income taxes in the US. Their tax liability is determined by factors such as income level, age, filing status, and dependency status. Even if they are not required to file a tax return, students may choose to do so if they are entitled to a refund of withheld income tax or are eligible for a refundable credit.
International students and scholars in the US on F and J visas are typically considered nonresidents for tax purposes. However, they are still subject to federal and state income taxes. The Internal Revenue Code requires nonimmigrant students in F-1 status to file Form 1040-NR (federal tax return) to assess their federal income and taxes. They must also file Form 8843 with the IRS, regardless of whether they earned income during their stay. Additionally, they may be required to file a state tax return, depending on the state.
International students who meet the IRS's substantial presence test are considered US residents for tax purposes. As residents, they are subject to income taxes imposed by federal, state, and even local governments. Their tax liability is based on their total income and other personal circumstances. To assist with tax filing, international students can use tax preparation software like Sprintax, which is provided by the Office of International Students & Scholars (OISS).
It is important to note that some countries have tax treaties with the US, which can reduce or eliminate federal income taxes for international students. In such cases, income that is not taxable due to a tax treaty must still be reported on a US income tax return, even if no tax is due. While Sprintax can assist with tax preparation, international students are ultimately responsible for verifying the accuracy of the information entered and ensuring compliance with tax requirements.
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Student worker tax exemptions during school breaks
Students are not automatically exempt from paying taxes on their earnings, which remain subject to federal and state income taxes. However, certain student workers may be exempt from Social Security tax and Medicare tax (FICA taxes) withholding.
The student FICA tax exemption applies only to employment during school breaks of five weeks or less. To be exempted, you must be eligible for exemption on the last day of classes in the academic period preceding the break, and you must also be eligible to enroll in classes following the break. Services performed between the fall and spring semesters are generally eligible for the FICA exemption. Summer employment will not be exempt from FICA taxes unless you are enrolled and attending classes in accordance with the half-time standards for the summer session.
The FICA exemption also applies to students enrolled on less than a half-time basis if the student requires less than the above standards to complete the degree program. The law specifically distinguishes teaching assistant and graduate assistant positions that qualify for the FICA exemption, provided that the above half-time standards are satisfied.
The law specifically disqualifies postdoctoral students, postdoctoral fellows, medical residents, and medical interns from student FICA exemption eligibility because the services performed are not for the purpose of pursuing a course of study. During any semester or summer when a student worker has multiple appointments—at least one of which confers professional, career, or full-time employee status or provides certain employee benefits—FICA taxes will be withheld from all earnings, and no exemption will be allowed.
All post-qualifying Ph.D. candidates in TA, GA, or student employee positions who are working on their dissertations and are registered for either full-time or part-time study will be exempt from FICA tax withholding.
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Postdoctoral students are disqualified from FICA exemption
Students are generally not exempted from paying income taxes. Their status as full-time students does not exempt them from federal income taxes. However, if their income is below a certain threshold, they may not be required to file a tax return or pay income tax. This threshold depends on factors such as age, filing status, and dependency status.
Postdoctoral students, postdoctoral fellows, medical residents, and medical interns are specifically disqualified from the student FICA exemption. FICA, or the Federal Insurance Contributions Act, imposes taxes on all wages received with respect to employment. The law states that only student employees who provide services "incident to and for the purpose of pursuing a course of study" are eligible for the exemption.
The services performed by postdoctoral students are considered to be beyond the scope of pursuing a course of study. This is because their work often requires advanced knowledge in a field of science or learning, entails the consistent exercise of discretion or judgment, and is predominantly intellectual in nature.
Examples of ineligible positions
The following positions are specifically ineligible for the student FICA exemption:
- Postdoctoral students
- Postdoctoral fellows
- Medical residents
- Medical interns
Factors determining exemption
The determination of whether a student employee qualifies for the FICA exemption is based on a “facts and circumstances" test. This means that all relevant information, including the nature of the services performed and the educational relationship with the institution, is considered. Additionally, the university's payroll system will continually review the student's enrollment status throughout the year to determine their eligibility for the exemption.
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Students may need to file a tax return to receive a refund
Students enrolled in higher education are often eligible for a surprising amount of money in tax credits and benefits, which can be refunded directly to their bank accounts. For example, the American Opportunity Tax Credit (AOTC) could give a U.S. citizen or resident enrolled in college up to $2,500 each year. This money can be used to help pay for tuition, food, housing, health care, and more. Another education credit, the Lifetime Learning Credit, works similarly to the AOTC.
Even if you are not required to file an income tax return, you may choose to file a return if you are entitled to a refund of withheld income tax or estimated tax, or if you are eligible for a refundable credit. For example, if you had your employers withhold income taxes from your paychecks, you can file returns and get refunds.
If you are a full-time student, you may not be working full-time and may not reach the income levels that require you to file a tax return. However, if you are a dependent and your unearned income (including interest and dividends, unemployment compensation, and income as a beneficiary of a retirement plan) is greater than $1,300, or your self-employment income is more than $450, you must file a return. Additionally, college students who are single and earned more than $14,600 in 2024 must file an income tax return. Students who earned less can file a return to get a refund of taxes withheld by their employer.
It is important to note that scholarships and grants are typically tax-free, but there may be situations where you have to include them in your taxable income. Additionally, if you have student loans or pay education costs, you may be eligible to claim education deductions and credits on your tax return, such as loan interest deductions and qualified tuition programs (529 plans).
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Frequently asked questions
No. Every US citizen or resident must file a US income tax return if certain income levels are met. However, if your income is below the filing requirement for your age, filing status, and dependency status, you do not need to pay income tax.
If you are an international student in the US, you are subject to federal and state income taxes. However, if you are from a country with a tax treaty with the US, you may be eligible to exempt a portion of your earnings from taxes.
Students in the US who are employed part-time during school breaks of five weeks or less may be exempt from FICA taxes. Graduate students who are enrolled in an academic semester with full-time certification and who are working on campus are also exempt from FICA deductions.
Postdoctoral students, postdoctoral fellows, medical residents, and medical interns are not eligible for FICA tax exemption because the services they perform are not for the purpose of pursuing a course of study.
FICA refers to Federal Insurance Contributions Act tax, which includes Social Security and Medicare.
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