Like the title says, from the filing process and tax questions to tax policy and reform, you can search and share All Things Tax here. This is the place to find answers to all your general questions that don't fall under the other categories. And just a reminder: questions about software or online filing should be posted in DIY Products.
12-20-2016 12:58 PM
Hi all, I'm an unemployed full time college student, no earnings 2016, but have rec'd state grants, federal grants, a couple small scholarships, and finally private Sallie Mae students loans to live off of as I am attending classes full time. Tese go for tuition, books, class expenses/supplies, and the rest for rent, utilities, bills, etc. like the rest of the adult world. My family and I have paid a bit every month on the S-M loans ("Smart Option"), but I have paid no interest on my past or present Stafford Loans at all this year. I wish to know if I qualify for any sort of a refund, as I see via a Google search that there are a couple (two/three??) options, but they are confusing to me. I am over 23, and no on else can claim me as a dependant, I'm totally on my own. I rec. healthcare insurance through no direct cost to me in WA. per the ACA deal. Thanks so very much in advance for your advice, help, etc.!! Really lost here....
Solved! Go to Solution.
12-20-2016 02:10 PM
Welcome to the community.
I have been helping people with health insurance tax issues since Obamacare started and am an expert in that area as well as in education, and I'll be glad to help you with this.
Let's look at the health insurance part of this first. Since you have insurance through the marketplace and received premium tax credit (you said you didn't have to pay for insurance so you must have received some premium tax credit in advance) you will need to file a tax return to reconcile your PTC and show that are eligible for the credit you received. The official determination of how much credit you are eligible to receive for the year is made on your tax return by filling out Form 8962, and you may either get a refund of additional premium tax credit or end up owing a repayment depending on the outcome of your reconciliation. Here's the kicker though - if you don't have any income you are not eligible to receive any premium tax credit so from what you've told me you may end up paying it back. Note however that repayment is limited based on your income, so if you get hit with a mandatory repayment it may be $300 instead of the full amount that was paid out on your behalf.
Next we'll look at dependency. Did you live with someone else except for when you are at school or do you have your own place permanently? I ask because you may still qualify to be claimed as a qualifying relative of someone else even though you can't be claimed as a dependent child. If you can be claimed this will effect the outcome of what happens with your premium tax credit as well as your scholarship income and/or education credit.
Finally, there is some good news with your education expenses. Have you or has whomever claimed you taken the American Opprtunity Credit four times? Have you been in college for less than four years? Depending on the answer to these two questions you may be eligible for the AOC which provides up to a $1,000 refund and up to $1,500 worth of non-refundable credit.
What you'll want to do here, provided that you're eligible for the AOC credit, is since you had no income you'll want to report ALL of your scholarships & grants as taxable income on Line 7 of your 1040 return. This way all of your tax-free assistance is assigned to your room & board and your meal costs and what you paid between student loans and out-of-pocket payments is assigned to your qualified expenses (tuition, fees, and books) first. This is important because if for instance you have $10,000 in student loans for the year, you paid $5,000 out-of-pocket for the year, and you had $12,000 worth of scholarships & grants for the year then if you do not assign the scholarships and grants to your room & board costs you will not be eligible for the refundable AOC. If scholarships are not claimed as taxable income then you have to subtract your qualified expenses from your scholarship amount to determine what, if anything, can be used to figure the amount of your AOC tax credit. However, if you report the scholarships and grants as taxable income then you can claim the full $1,000 refundable credit because your loans and out-of-pocket payments will be assigned to your qualifying expenses and the full amount of your qualifying expenses can be used to calculate the AOC. Also, in your situation your standard deduction and personal exemption, and your non-refundable AOC credit will reduce your tax to zero or close to zero because you didn't have any other income, so your refund from the education credit will not be reduced because of tax your the scholarship income.
Note that if you're able to claim the refundable AOC credit that will offset and repayment that you are hit with on your health insurance and you'll probably still get a refund.
How much were your scholarships & grants? You student loans & out-of-pocket payments? I'm 99% positive that by using the strategy I laid out for you above that you can claim the full AOC credit provided that you meet the qualification, however these questions will help me to give you an even more precise answer on the education credit and how much you'll be eligible for. Note that you'll receive Form 1098-T which will report this information to you at some point in early February.
If you're not eligible to claim the AOC credit then the Lifetime Learning Credit is available to you, however because the LLC credit is non-refundable it will only benefit you in a year when you have earned income.
I hope this helps you out & I'll be here if you have any other questions.
Senior Tax Advisor (Tampa, FL)
12-22-2016 12:35 PM
Thanks for the reply and good info., I appreciate it. Here's what I have in response:
1.) You will need to file a tax return to reconcile your PTC. I have paid nothing for this year’s healthcare, have received no "credit" that I am aware of, and have $0 reportable or earned income for all of year 2016. So, unsure if this is anything to consider or if it is fine as-is. I can't see the gov't wanting me to "pay" when I have no earned income?
2.) Did you live with someone else except for when you are at school or do you have your own place permanently? I live alone by myself in a permanent apartment, have no roommates or other dependants, and no one else can claim me as any sort of a dependant. I'm totally on my own as far as this is concerned.
3.) Have you or has whomever claimed you taken the American Opportunity Credit four times? Have you been in college for less than four years? Yes, I believe I took the AOC last year for the first time, in tax year 2015. I have been in college off and on since I was 18 with two other AA degree pursuits (one obtained, one not, and am working on my theoretical third AA now), but all together it is most likely over four years total, yes. In my current degree, I am in my second year of school. If it matters, I have no "continuous" four years of school, nor do I have a four year BA or BS degree; I've only attended two-year community colleges & technical colleges.
Thanks for the laid out strategy, I've saved it for future reference to use when the time comes in Jan. 2017 to file with the IRS. The answers to the above Q's are above. Thanks for your reply once again beforehand, no hurry on this. I appreciate the help very much! -Mark
12-22-2016 01:22 PM
You're quite welcome. Thank you for the additional information. I can now give you a difinitive answer.
Since you lived in your own permanent place of residnce by yourself you will not meet the residence requirement and therefore nobody will be able to claim you as a dependent.
Because you have been in school for more than 4 years in total you will not qualify for the American Opportunity Credit, so unfortunately you will not be able to get a refund out of claiming education credit. Also, so long as your scholarships & grants total less than your qualified expenses for the year you will not have any taxable scholarship income to report (you're not going to report any of your scholarships & grants as taxable income since that won't benefit you since you're not eligible for the AOC).
If you start working during 2017 then the Lifetime Learning Credit (which you do qualify for) could be of benefit because it will help reduce your tax (if any) and thus increase your refund on your 2017 tax return.
Finally, if you did not receive any premium tax credit then you will not need to file for that reason. However, you may not be aware that you got premium tax credit if it was paid out on your behalf. The premium tax credit is applied for when you apply for marketplace insurance and it is usually paid out to the insurance company on your behalf when you are approved for the insurance (you don't actually receive it in your bank account) and that may be why you didn't have to pay for your insurance. I'm not saying it was, but if any PTC was paid out on your behalf then you'll get the Form 1095-A and you'll have to file a return to report that information even if there is no additional refund or repayment required.
So unless you recieve a Form 1095-A from the health insurance marketplace you will not need to file a tax return.
I'm sure that you would rather have heard that you could get a little bit of a refund, but at least you know what to expect this tax season.
Always glad to be of help.
12-22-2016 01:55 PM
Thanks again for the great and detailed info., I understand this mess clearly now. ;-) I guess I'll wait to see what forms I receive in the mail, and then go from there, even though it sounds like ultimately I won't receive a refund unfortunatelty. Bummer! I know I usually get 1098's from my school and my loan servicers, so will wait on those and see, and as well if and when I receive the aforementioned form 1095-A.
Thanks again very much, and I'll make another post in the future if I am still residing in my tangled web of IRS and tax confusion.
Have happy holidays!!
12-22-2016 03:28 PM - edited 12-22-2016 03:32 PM
You're quite welcome.
I forgot to mention earlier, since you said that you've only claimed the American Opportunity Credit maybe once, that if you didn't claim it for any of your very first four years of college, and if any of those years were 2013, 2014, or 2015, then you can still amend your tax return or file a tax return for that year and claim the refundable credit. You have 3 years from the original due date for any given tax year to file for a refund.
Also, note that if you were claimed as a depdendent for any of those first four years that you were in school then your parents would have to claim the credit for you, but otherwise it's yours to claim.
Have a great holiday.
12-22-2016 03:37 PM
Sounds good, thanks again. I took the AOC in 2015, but was not in school 2013 or 2014 & was employed full times those years, and since it won't work for 2016 tax year, it appears I'm unfortunately out of luck. Thanks for the FYI though anyhow.