Different countries offer different types of student tax breaks, with income tax exemptions being the most common. The UK exempts students from income, housing, and other taxes, while the US offers tuition deductions and credits. Students in the US must be proactive in claiming exemptions, while students in the UK and Europe often receive automatic tax breaks.
There are different types of student tax breaks in different countries, and even within some countries, in different states. The most common student tax breaks relate to income taxes. People who earn below a certain dollar amount each year are generally exempt from paying state or national income taxes, and most students fall into this category. Some countries, particularly the UK, specifically exempt students from income, housing and other types of taxes. United States tax law offers a large number of tuition deductions, credits, and other tax savings that may apply to students and their families, but does not offer many student-specific exemptions.
Governments assess tax on a number of different things—property, land, sales, and exports, to name a few—but revenue is by far the largest international source of tax revenue. Most countries assess income tax on a sliding scale, where the tax rate is directly proportional to the amount of annual salary awarded. In most cases, people who earn only small amounts of money are exempt from tax and can usually claim a tax refund if tax has already been withheld from their pay. This is the most common of the student tax exemptions.
The UK allows students to submit a special student exemption form to qualify for an exemption from UK income tax. British students who work only during the holidays automatically qualify. Students who work year-round are eligible for student tax breaks in this category only if they earn less than the threshold amount for the applicable year.
Most countries in Europe also have automatic tax breaks for students outside of income. The UK council tax is an example. Council tax applies to all British subjects, unless they are students. Qualifying for student tax breaks like this usually requires only the filing of a student status form with the local tax authority. You rarely have to pay tax as a student in the UK, at least none that has to be filed with the national tax office.
In general, the US system requires students to be much more proactive than the systems in the UK, Europe and most other parts of the world. Students are not automatically eligible for student tax exemptions in the United States. The United States tax code, which is administered by the Internal Revenue Service, or IRS, is based on a series of deductions.
The government presumes that citizens owe a certain amount of tax, but citizens are allowed and even encouraged to claim various deductions and exceptions. Students whose income falls below the US limit amount will generally qualify for tax exemption, but not by virtue of their student status. Other student deductions may also apply.
Some of the most common student deductions for federal and state tax purposes relate to tuition credits. In most cases, students and their families can take at least a partial deduction for qualified tuition and other education-related expenses. Parents generally can also deduct full-time students they claim as dependents. Once students graduate, they can take a tax credit, which is like a deduction, for the interest paid on any student loan.
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