Savanna Hoffman
Whether or not students under 25 pay income tax depends on a variety of factors, including their income, employment, and dependency status. Students may be eligible for tax benefits such as loan interest deductions, credits, and tuition programs, which can lower the amount of tax they owe. Additionally, scholarships and grants are typically tax-free, but there may be situations where they are considered taxable income. Students who are dependents on their parents' tax returns are generally not eligible to claim education credits, and their parents may claim these deductions instead. The age of a dependent child also impacts their tax filing requirements, with different rules applying to children under 19 or under 24 if they are full-time students.
| Characteristics | Values |
|---|---|
| Age criteria for filing taxes | There is no age limit for permanently disabled individuals. The age limit is 19 for non-students and 24 for full-time students. |
| Income criteria for filing taxes | Minors who earn less than $14,600 in 2024 will usually not owe taxes but may choose to file a return to receive a refund of tax withheld from their earnings. Minors who earn more than $1,300 in unearned income for tax year 2024 must file their own tax return. |
| Other criteria for filing taxes | Minors who qualify as dependents on their parent or relative's tax return do not have to file a separate tax return. |
| Tax benefits for students | Students may be eligible to claim education deductions and credits on their tax return, such as loan interest deductions, qualified tuition programs (529 plans) and Coverdell Education Savings Accounts. |
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What You'll Learn
Student loan interest deductions
Whether or not minors need to file income tax returns depends on several factors, such as earned income from a job, including self-employment, unearned income typically from investments, or the need to claim a refund. Minors who qualify as dependents on their parent or relative's tax return do not have to file a separate tax return. In the eyes of the Internal Revenue Service (IRS), all dependents are classified as "qualifying children" or "qualifying relatives", with the qualifying child label being most relevant for teens.
If you are facing student debt after college, the student loan interest tax deduction can help with your bottom line as you're repaying your loans. Student loan interest is the cost of borrowing money to pay for your education. When you take out a student loan, you agree to repay the loan amount (the principal) plus interest, which is calculated as a percentage of the unpaid principal balance. The interest includes both required and voluntarily prepaid interest payments.
Federal student loan borrowers could qualify to deduct up to $2,500 of student loan interest per tax return per tax year. As long as your student loan qualifies, you can claim the student loan interest tax deduction as an adjustment to income. You don’t need to itemize deductions to claim it. The deduction is gradually reduced and eventually eliminated by phase-out when your modified adjusted gross income (MAGI) amount reaches the annual limit for your filing status. You can claim the deduction if all of the following apply:
- You paid interest on a qualified student loan in the tax year.
- You're legally obligated to pay interest on a qualified student loan.
- Your filing status isn't married filing separately.
- Your MAGI is less than a specified amount, which is set annually.
- Neither you nor your spouse, if filing jointly, were claimed as dependents on someone else's return.
If you paid $600 or more of interest on a qualified student loan during the year, you should receive a Form 1098-E, Student Loan Interest Statement from the entity to which you paid the student loan interest.
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Scholarships and grants
Whether or not a student under 25 needs to file an income tax return depends on many factors, such as earned income from employment, unearned income from investments, or the need to claim a refund. A student under 25 who may be claimed as a dependent on their parent or relative's tax return does not have to file a separate tax return. In the United States, all dependents are classified as "qualifying children" or "qualifying relatives" by the Internal Revenue Service (IRS), with the qualifying child label being most relevant for teens.
In the state of New York, there are various scholarships and grants available for students under 25. For instance, there is a tuition award for part-time students enrolled in eligible non-degree workforce credential programs at participating SUNY and CUNY colleges. This award also enables students from families earning $125,000 or less per year to attend a state-operated SUNY or CUNY college tuition-free. Additionally, scholarships are available for students whose parents served in the U.S. Armed Forces during specified times of war or national emergency, as well as for children, spouses, and financial dependents of deceased or disabled members of the U.S. military or state-organized militia.
There are also scholarships and grants available for students under 25 who are pursuing specific fields of study. For example, scholarships are offered to undergraduate or graduate students seeking careers as math and science teachers in secondary education, as well as to high school students who are top students and plan to attend college in New York State. Furthermore, tuition awards are provided for students pursuing a master's degree in education at SUNY or CUNY full-time.
Outside of New York, there are also scholarships available for students under 25 across the United States. Scholarship websites like Scholarships.com offer directories of opportunities specifically for students aged 25 and under. These opportunities may be tailored to the student's age, field of study, or other specific criteria.
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Self-employment income
Whether or not a student under 25 needs to pay income tax depends on their income and dependency status, not just their age. Minors who qualify as dependents on their parent or relative's tax return do not have to file a separate tax return.
If a minor earns $400 or more in self-employment income, they are required to file a tax return and pay self-employment tax. Self-employment tax is a Social Security and Medicare tax for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. The self-employment tax rate is 15.3%, consisting of 12.4% for social security and 2.9% for Medicare.
To pay self-employment tax, you must have a Social Security number (SSN) or an individual taxpayer identification number (ITIN). If you do not have an SSN, you can apply for one using Form SS-5, Application for a Social Security Card. The IRS will issue an ITIN if you are a nonresident or resident alien who does not have and is not eligible to get an SSN. To apply for an ITIN, file Form W-7, Application for IRS Individual Taxpayer Identification Number.
As a self-employed individual, you may have to file Estimated Taxes quarterly. You can use these estimated tax payments to pay your self-employment tax. Form 1040-ES, Estimated Tax for Individuals, can be used to figure out these taxes. This form contains a worksheet similar to Form 1040 or 1040-SR, which is used to report any income or loss from self-employment. You will need your prior year's annual income tax return to fill out Form 1040-ES.
You can also deduct the employer-equivalent portion of your self-employment tax when calculating your adjusted gross income. Additionally, there are deductions available for health insurance, a home office, and more.
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Kiddie tax
Whether or not a student under 25 needs to pay income tax depends on many factors, such as earned income from a job, unearned income from investments, and dependency status. A minor who may be claimed as a dependent must file a return once their income exceeds their standard deduction. For the tax year 2024, this is the greater of $1,300 or the amount of earned income plus $450, up to a full standard deduction of $14,600.
Now, onto the Kiddie Tax. The Kiddie Tax is a tax imposed on income unrelated to employment earned by individuals aged 18 or younger, or dependent full-time students under 24. It was introduced as part of the Tax Reform Act of 1986 to prevent parents from registering investments in their children's names to avoid paying taxes. The Kiddie Tax threshold is adjusted each year for inflation. For example, in 2023, unearned income surpassing $1,250 was subject to the child's tax rate, and anything above $2,500 was taxed at the guardian's rate. In 2025, the annual limit was $2,700.
The Kiddie Tax includes unearned income a child receives, such as interest, dividends, capital gains, rent, and royalties. Any salary or wages the child earns are not subject to the Kiddie Tax. The tax applies to dependent children under 18 at the end of the tax year or full-time students younger than 24. To be more specific, the child must be under 19 or under 24 if they are a full-time student, have a gross income of less than $13,000 for the tax year, and have income only from interest and dividends.
There are two ways to report a child's unearned income. The first $1,350 of unearned income is covered by the Kiddie Tax's standard deduction and is not taxed. The next $1,350 is taxed at the child's marginal tax rate, and anything above this is taxed at the parents' marginal tax rate.
It is important to note that the Kiddie Tax has seen many iterations, and tax laws are subject to change. Therefore, it is always a good idea to consult a professional tax advisor for specific advice.
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Filing status
The filing status of a student depends on their age, income, and dependency. The IRS treats dependent children differently from other taxpayers. If a student is claimed as a dependent, their parents may be eligible to claim education deductions and credits.
According to the IRS, a dependent child who has earned more than $14,600 of income in 2024 typically needs to file a personal income tax form. This includes earned income from a job and unearned income, such as investments. For example, a child who earns $1,300 or more in "unearned income," such as dividends or interest, needs to file a tax return.
Students who are single and earned more than the $14,600 standard deduction in tax year 2024 must file an income tax return. This includes earned income from a job and unearned income, such as investments.
If a student is a dependent, their unearned income (including interest, dividends, unemployment compensation, and income as a beneficiary of a retirement plan) must be greater than $1,300, or their self-employment income must be more than $450, to file a tax return.
Students who are dependents on their parents' tax returns are generally not eligible to claim education credits. In this case, the parents may be eligible to claim the education deductions and credits.
Students with dependents, such as a child or younger sibling they financially support, would file their taxes as the head of a household, not a single person, and claim a dependency exemption.
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Frequently asked questions
It depends on their income and dependency status. Students under 25 who are claimed as dependents on their parent or relative’s tax return do not have to file a separate tax return. However, if their income exceeds their standard deduction, they may need to file a tax return. For tax year 2024, this is the greater of $1,300 or the amount of earned income plus $450 up to the full Standard Deduction of $14,600.
For students under 25, income can include earned income from a job, including self-employment, or unearned income from investments. Scholarships and grants are typically tax-free, but there may be situations where they need to be included as taxable income.
Yes, there are tax benefits available for students under 25. Students who pay for education costs may be eligible for education deductions and credits, such as loan interest deductions, qualified tuition programs, and education savings accounts.
