Janice Lozano
Whether or not a full-time student has to pay taxes in Maryland depends on a number of factors, including their residency status, income, and the type of tax in question. In this paragraph, we will explore the tax obligations of full-time students in Maryland and provide an overview of the factors that determine whether or not they are required to pay taxes.
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What You'll Learn
F and J visa holders
International students with F and J visas are required to file a tax statement form 8843 by mid-April of each year for the prior year. If they did not receive wages as an employee subject to US tax withholding, the deadline is June 15, 2025. They can request an extension of time to file their federal return by submitting Form 4868 by April 15, 2025. However, this does not extend the time to pay any taxes owed.
It is important to note that each person is responsible for the accuracy of their income tax returns and any resulting penalties or interest. While some resources are available, such as Sprintax and TerpTax, it is recommended that students with complex tax situations seek guidance from a professional tax preparation service.
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Non-resident status
There are three primary residency designations in Maryland for state income tax purposes: resident, part-year resident, and non-resident. If you are a non-resident of Maryland, you may still be required to file a Maryland state income tax return even if you do not live in the state or spend a significant amount of time there. This is the case if you have income derived from a property within the state or a business/trade/occupation carried out within the state.
If you are a non-resident of Maryland and do not have a legal obligation to file a return, you won't have to file a non-resident Maryland return. However, if you have filed a federal tax return using a Maryland address but have not filed a Maryland state resident return, the Comptroller's Office may send you an Information Request letter asking you to provide information about where you live and why you didn't file a return. If you want to dispute the state's belief that you are a resident, you will have to provide evidence that you did not spend 183 days in the state. This evidence can include receipts, place of employment, other homes owned, connections to the community, and your child's school.
If you are a non-resident of Maryland and have income derived from the state, your tax rate will be calculated based on your total income rather than specific state-only income. This means that Maryland will consider all kinds of income, including salary, stocks, and income from an LLC. This can result in a higher adjusted gross income than expected.
Military members who are legal residents of Maryland are required to file a resident return and report all income, regardless of where it was earned. However, if you received military pay for service performed outside the United States, you may be able to subtract up to $15,000 of that income from your Maryland taxable income.
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Resident status
Maryland Residency
According to the Maryland Comptroller, an individual is considered a resident for tax purposes if they have maintained a "place of abode" in the state for the entire tax year, regardless of their presence in the state. This definition considers individuals who have a permanent home or a place where they regularly live in Maryland as residents.
IRS Residency Definition
The IRS, on the other hand, defines residency based on the "Substantial Presence Test." This test considers an individual a resident for tax purposes if they meet the following criteria:
- They have been present in the United States for at least 31 days during the current year, and
- The total of their days in the United States during the current year and the two preceding years is 183 days or more, with each year weighted differently.
Non-Resident Tax Status
Non-resident aliens for tax purposes, including international students on F or J visas, generally file Form 8843 and Form 1040NR or 1040NR-EZ if they have income to declare. It's important to note that non-resident aliens may still be required to file state tax returns if they meet the state's residency requirements or have income sourced from that state.
Impact of Residency Status on Taxation
An individual's residency status significantly impacts their tax obligations. Residents generally pay taxes on their worldwide income, while non-residents are typically taxed only on income sourced from within the United States. Additionally, residents may qualify for different tax credits, deductions, and exemptions than non-residents.
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Tax preparation assistance
In Maryland, full-time students have to pay taxes on income earned during the year. If you're a full-time student and a Maryland resident, you may be exempt from paying taxes on some types of income, such as scholarships or grants, but you will still need to file a tax return and report your income.
The state of Maryland offers various resources to help residents, including students, prepare their taxes. Here are some options for tax preparation assistance:
- The CASH Campaign of Maryland: This non-profit organization provides free tax preparation services for individuals and households with incomes under $67,000. They have locations across the state, including in Baltimore, Cumberland, Annapolis, and Towson. You can schedule an appointment by calling 410-234-8008 or visiting their website.
- 211 Maryland: By dialling 211, you can connect with local agencies and community groups that offer free tax preparation assistance. These include the Volunteer Income Tax Assistance (VITA) program and the American Association of Retired Persons (AARP).
- Maryland Comptroller's Office: The Comptroller's Office provides support with tax questions and concerns year-round. You can visit their website, Marylandtaxes.gov, or schedule a visit at one of their state-wide locations.
- Free Tax Software: Starting in 2025, Marylanders may be eligible to file their taxes directly with the IRS for free. You can access free tax software through the IRS Free File Program.
- Military Tax Filing: If you're a member of the military or a veteran, you may qualify for free tax filing through MilTax software, provided by the Department of Defense and Military OneSource.
- Towson University's Tax Preparation Services: Each year, the College of Business and Economics at Towson University partners with The CASH Campaign of Maryland to offer free tax preparation services to low-income individuals and families. Students serve as tax preparers and site managers, providing assistance to those with incomes under $55,000. Appointments are available on Fridays and Saturdays from mid-February to the end of March.
Remember to have all your tax documents ready before scheduling an appointment or filing your taxes. These organizations can guide you through the process and ensure you receive any refunds or credits you're entitled to.
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Tax credits
In Maryland, full-time students can take advantage of several tax credits to reduce their tax liability. Here are some key tax credits and considerations for full-time students:
Education Tax Credits:
- American Opportunity Credit (AOC): The AOC offers a credit of up to $2,500 per year for undergraduate students enrolled at least half-time. It can be claimed for up to four years of college education, and up to $1,000 of this credit may be refundable. Qualified expenses covered by the AOC include tuition, required enrollment fees, and course materials.
- Lifetime Learning Credit (LLC): The LLC provides a credit of up to $2,000 per year with no limit on the number of years it can be claimed. This credit is beneficial for graduate students and those taking professional development courses, as there is no requirement to be pursuing a degree. The LLC covers tuition and required enrollment fees.
- Income Limitations: Both the AOC and LLC phase out at higher income levels. If your parents don't qualify for these credits due to income limitations, you may discuss the possibility of not being claimed as their dependent. This would allow you to claim the credit yourself, potentially reducing your tax liability.
Other Tax Credits:
- First-Time Homebuyer Savings Account: In Maryland, individuals can claim tax credits on contributions to a first-time homebuyer savings account. This credit is available to each spouse on a joint return who is the sole account holder of an eligible savings account.
- Business Tax Credits: Maryland offers various tax credits to businesses operating in the state, including the Aerospace, Electronics, or Defense Contract Tax Credit for businesses creating or retaining qualified positions and making significant expenditures in Maryland.
- Nonprofit Tax Preparation Services: Organizations like TerpTax provide free tax preparation services for low- to mid-income members of the University of Maryland community. Such services can help students navigate their tax obligations and take advantage of available credits.
It's important to stay informed about tax credits and deductions specific to Maryland and consult official sources or tax professionals for the most accurate and up-to-date information.
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Frequently asked questions
It depends on the student's residency status. If a student has lived in Maryland for six months or more and has earned $9,350 or more, they must complete and submit a Maryland tax return. Non-resident students are also required to submit a tax return, but they may need to use different forms.
A student is considered a resident for tax purposes if they pass the Substantial Presence Test. This test takes into account the number of days a person has been present in the United States over a period of time. If a student does not pass this test, they are considered a non-resident for tax purposes.
Resident students need to fill out Form 1040EZ, 1040A, or 1040 for their Maryland tax return. These forms can be obtained online at www.irs.gov or sometimes at local post offices or libraries.
Non-resident students need to fill out Form 8843 "Statement for Exempt Individuals" and Form 1040NR or 1040NR-EZ if they have income to declare.
Montgomery College in Maryland offers free webinars and additional resources for students to understand and complete their tax forms. The college also provides discount codes for up to 30 students to use Sprintax, a tax preparation website. Students with complex tax situations are advised to seek guidance from a professional tax preparation service.
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