Are My Work-Study Earnings Taxed?

If you have a student job as part of your financial aid package, you might be wondering if your work-study earnings are taxed? The short answer is yes, they are.

Federal work-study pays you just like any other job, so the income is subject to federal and state payroll taxes and should be reported when you file your taxes. FICA taxes (social security and Medicare taxes) are exempt if you’re enrolled in 6 or more credit hours or are working on campus.

The good news, however, is that your work-study income does not count against your FAFSA® financial aid award.

Are All Work-Study Earnings Taxed?

If you have a student job as part of your financial aid package, you might be wondering if your work-study earnings are taxed? The short answer is yes, you need to include your work-study income when you file taxes.

Federal work-study pays you just like any other job, so the income is subject to federal and state payroll tax and should be reported when you file your taxes. FICA taxes (social security and Medicare taxes) are exempt if you’re enrolled in 6 or more credit hours or are working on campus.

The good news, however, is that your work-study income does not count against your FAFSA® financial aid award. That means when you go to file for aid in the future, the income you made at your work-study jobs won’t count against you.

Are All Work-Study Jobs Taxed?

No, there are a few exemptions when it comes to taxable work-study income.

If any part of the work-study pays you money for teaching or doing research under the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship, the earnings are tax-exempt. Degree candidates at an eligible college may also remove the income from their taxes if using the money to pay for qualified educational expenses.

Essentially, you do not pay tax on certain expenses. Make sure you talk this information through with a tax accountant to ensure you file everything correctly.

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Why Are Work-Study Job Earnings Taxable?

Although federal work-study programs are technically a type of financial aid, they allow you to earn money to pay for expenses instead of taking out a loan. Therefore, they do need to be included on your tax return.

The IRS looks at these earnings as taxable income. This is because the earnings aren’t directly applied to tuition or other qualified education expenses. Instead, the student receives the money as a paycheck, just like any other job. Students can use this money for whatever they see fit, such as offsetting cost-of-living expenses.

Because there are no guidelines for where this money goes, it’s just like any other job for the purposes of tax reporting and needs to be included when you file your tax return.

What’s the Advantage of Work-Study If It’s Taxable?

If you’re a student getting taxed on work-study earnings, you might be wondering why you would even apply when there are higher-paying jobs available. The reason to consider work-study is that it comes with some significant advantages for students compared to other jobs.

Despite being taxable, the number one reason students choose work-study is that the amount of money they make doesn’t count against them when they file FAFSA® for the next year. That means it won’t lessen the financial aid package your college awards you.

An additional advantage of work-study is that the jobs are usually associated with your college, which means they’re likely to work with your class scheduled. That means you’re generating income that you can use towards your education, you have a flexible schedule, and you don’t get dinged on the FAFSA®. You don’t have to worry about balancing your student life and your work life. Or, more importantly, losing much-needed financial aid.

Jobs in the private sector do count towards your FAFSA® and might prevent you from getting the same amount of financial aid in the future. They also have more competitive hours, so for students, it can be hard to juggle your college class schedule and make an income at the same time.

What Tax Exemptions Can I Get?

If you’re using your work-study earnings to pay directly for qualified education expenses for college, you’re eligible for the American Opportunity Tax Credit. This allows you a maximum credit of up to $2,500, including 100 percent of your first $2,000 in expenses and 25 percent of the next $2,000. For students, this is a great benefit. You’ll be able to fill out information regarding this credit when you file your tax return.

In some instances, you can also qualify for tax-exempt work-study. If you work for specific government agencies, nonprofit organizations, or certain types of health programs, you may not have to pay taxes on your earnings. The National Health Service Corps Scholarship Program and the Armed Forces Health Professions Scholarship are two programs that specifically outline tax exemptions for work-study, so if you’re a student in a health field, check them out.

Work-study is a phenomenal program for need-based students who might have trouble finding work or paying for education expenses even with financial aid. However, knowing how it’s taxed or if you’re eligible to reduce or eliminate taxes makes it all the more attractive of an option. Make sure to check out all your options to save as much money as you can on your work-study program. If you need to speak with a tax consultant, it can be helpful when determining what ta

Not only is it an opportunity for students to gain work experience, but is also positions them for better financial success after college graduation.

How to File Taxes For A Work-Study Position?

When it comes time to file taxes, your employer will provide you with a W-2 form that contains all the information you need to file your income taxes. You can use the IRS 1040EZ or 1040 forms to file and, after you’re done, you will be eligible to receive an income tax return.

You do not have to pay to file your income taxes from work-study. The IRS provides a free tax filing tool you can use. To make the filing process smoother, try not to put off filing your income taxes when the time comes. Give yourself enough time to find everything you need to make the filing process easy.

Lastly, even though it doesn’t count against you, your student income from your work-study position should be included as earnings when filing the student portion of the Free Application for Federal Student Aid (FAFSA®).

No, there are a few exemptions when it comes to taxable work-study income.

If any part of the work-study pays you money for teaching or doing research under the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship, the earnings are tax-exempt. Degree candidates at an eligible college may also remove the income from their taxes if using the money to pay for qualified educational expenses.

Why Are Work-Study Job Earnings Taxable?

Although federal work-study programs are technically a type of financial aid, they allow you to earn money to pay for expenses instead of taking out a loan.

The IRS looks at these earnings as taxable income. This is because the earnings aren’t directly applied to tuition or other qualified education expenses. Instead, the student receives the money as a paycheck, just like any other job. Students can use this money for whatever they see fit, such as offsetting cost-of-living expenses.

Because there are no guidelines for where this money goes, it’s just like any other job for the purposes of tax reporting.

What’s the Advantage of Work-Study Then?

If you’re a student getting taxed on work-study earnings, you might be wondering why you would even apply when there are higher paying jobs available. The reason to consider work-study is that it comes with some significant advantages over other jobs.

Despite being taxable, the number one reason students choose work-study is that the amount of money they make doesn’t count against them when they file FAFSA® for the next year. That means it won’t lessen the financial aid package your college awards you.

An additional advantage of work-study is that the jobs are usually associated with your college, which means they’re likely to work with your class scheduled. That means you’re generating income that you can use towards your education, a great schedule, and don’t get dinged on the FAFSA®. You don’t have to worry about balancing your student life and your work life.

Jobs in the private sector do count towards your FAFSA® and might prevent you from getting the same amount of financial aid in the future. They also have more competitive hours, so for students, it can be hard to juggle your college class schedule and make an income at the same time.

What Tax Exemptions Can I Get?

If you’re using your work-study earnings to pay directly for qualified education expenses for college, you’re eligible for the American Opportunity Tax Credit. This allows you a maximum credit of up to $2,500, including 100 percent of your first $2,000 in expenses and 25 percent of the next $2,000. For students, this is a great benefit.

In some instances, you can also qualify for tax-exempt work-study. If you work for specific government agencies, nonprofit organizations, or certain types of health programs, you may not have to pay taxes on your earnings. The National Health Service Corps Scholarship Program and the Armed Forces Health Professions Scholarship are two programs that specifically outline tax exemptions for work-study, so if you’re a student in a health field, check them out.

Work-study is a phenomenal program for need-based students who might have trouble finding work or paying for education expenses even with financial aid. However, knowing how it’s taxed or if you’re eligible to reduce or eliminate taxes makes it all the more attractive of an option. Make sure to check out all your options to save as much money as you can on your work-study program.

Not only is it an opportunity for students to gain work experience, but is also positions them for better financial success after college graduation.

How to File Taxes For A Work-Study Position?

Your employer will provide you with a W-2 form that contains all the information you need to file your income taxes. You can use the IRS 1040EZ or 1040 forms to file and, after you’re done, you will be eligible to receive an income tax return.

You do not have to pay to file your income taxes from work-study. The IRS provides a free tax filing tool you can use. To make the filing process smoother, try not to put off filing your income taxes when the time comes. Give yourself enough time to find everything you need to make the filing process easy.

Lastly, even though it doesn’t count against you, your student income from your work-study position should be included as earnings when filing the student portion of the Free Application for Federal Student Aid (FAFSA®).