By Jamie Johnson, WCI Contributor
Enrolling in medical school is not only expensive, but it also requires a considerable time commitment. Medical school is a full-time job in itself, so many students choose not to work outside of their classes and studying. If you’re a full-time student with no income, you may wonder if you need to file federal income taxes.
The answer will vary depending on your situation—you may not meet the IRS’s requirements for filing, but it could still be beneficial for you to do so anyway.
Do Medical Students Need to File Taxes?
Maybe—according to the IRS, full-time students aren’t exempt from paying federal income taxes. Whether you need to file taxes depends on the following factors:
- Your age
- Filing status
- Whether you’re claimed as a dependent on another person’s taxes
- Your earned and unearned income
Full-time students are only required to file taxes once their income equals or exceeds the standard deduction for their filing status (for the 2022 tax year, the standard deduction is $12,950 for single people and $25,900 for married filing jointly). This includes earned income from a part-time job and unearned income from investments. However, grants or scholarships aren’t considered taxable income as long as you use the funds for school expenses.
But even if you don’t need to file federal income taxes, you may choose to anyway. When you file, you may find that you qualify for a refund, tax deductions, or credits that can reduce your taxable income. More importantly, any MS4 with federal student loans absolutely should file to establish a very low income for purposes of enrolling those federal loans in the federal Income Driven Repayment programs.
More information here:
Should I Do My Own Taxes or Pay Someone?
3 Tax Deductions for Medical Students
One of the benefits of filing your taxes is that you may qualify for certain deductions. Medical school is a huge expense, so taking advantage of the right deductions could help lessen the financial burden.
If you volunteer to provide medical services to individuals in need, the IRS lets you deduct any costs you incur. For instance, you can deduct travel expenses, medication, or medical equipment purchased to support your volunteering efforts. However, this is considered a charitable contribution, so the only way to claim the deduction is to itemize your deductions.
Student Loan Interest Deduction
The student loan interest deduction allows you to deduct up to $2,500 of interest paid on your student loans. This can be interest paid on voluntary or required loan payments. You need to meet the following requirements to claim this deduction:
- You paid interest on a qualified student loan
- No one has claimed you as a dependent on their tax returns
- Your filing status is anything other than Married Filing Separately
- You’re legally obligated to pay interest on your student loans
However, the amount you can claim will gradually be reduced if your Modified Gross Adjusted Income (MAGI) reaches the annual limit. For your 2022 tax return, you can't claim the deduction if your MAGI is more than $85,000 (single) or $175,000 (MFJ).
Lifetime Learning Credit
The Lifetime Learning Credit (LLC) is available for tuition and school expenses for students enrolled in an eligible school. The credit is worth up to $2,000 per year and is available for undergraduate and graduate students.
There’s no cap on the number of years you can claim the LLC. However, you must meet the following criteria to qualify:
- You’re enrolled at an eligible institution
- You’re enrolled in courses to either earn your degree or improve your job skills
- You were enrolled for at least one academic period during the previous tax year
To claim the LLC, you must receive Form 1098-T, Tuition Statement from your school. This statement will help you determine how much of the credit you’re eligible for.
How to File Taxes as a Student
If you’re filing taxes as a student with no income (or minimal income), here are the steps you’ll take to get started.
Fill Out the Correct Forms
You’ll need to fill out Form 1040 to file your federal income taxes, which is a basic income reporting form. If you made student loan payments, you’d also need to fill out Schedule 1. You can also fill out Form 8863 if you plan to claim education credits. States have their own rules for filing taxes, so you’ll need to find out what the guidelines are for the state you live in.
If you did bring in any earned income over the past year, you’ll need to provide your W-2. If you had business income, you'll file a Schedule C. And you should provide any documentation showing things like insurance payouts, unemployment, or anything else that could be considered income.
File Your Taxes for Free
If your adjusted gross income is $73,000 or less for 2022, you’re eligible to file your taxes for free through IRS Free File. You can either choose a guided tax preparation through one of the IRS’s partner sites or file your taxes yourself with electronic tax forms.
If you don’t want to use the Free File service to file your taxes, you can use a free service, like the one offered by TurboTax or H&R Block. And you can see if a Volunteer Income Tax Assistance program is available in your area. This program provides free tax assistance to qualifying individuals.
More information here:
The Bottom Line
If you’re a full-time medical student and don’t have a source of income, you may not need to file taxes. But even if you’re not legally required to file your taxes, there may be advantages to doing so anyway. You may qualify for tax deductions or credits that could benefit you financially, and you should be able to file your taxes for free through the IRS Free File, a free edition of TurboTax, or another tax filing service. And you definitely want an MS4 tax return filed unless you have zero in federal student loans.
Keep in mind that tax advice can vary greatly depending on your financial situation, where you live, and a number of other factors. If you have questions about filing your taxes, it’s best to speak to a qualified tax expert who can give you personalized recommendations. Here is a list of WCI-vetted tax strategists who could help.
Student loans and the many programs and options are challenging to navigate. If you need help, check out StudentLoanAdvice.com, a WCI company.
How did you handle filing taxes when you were in medical school? Is there anything you would have done differently? If you're in medical school now, what's your tax strategy? Comment below!