Graduating from college comes with exciting new beginnings—and some adult responsibilities, too. Among them? Navigating taxes. Whether you’re filing your first return or coordinating with your parents for optimal tax results, here are answers to the most common tax questions new grads face.
Can My Parents Still Claim Me as a Dependent?
Your parents can claim you as a “qualifying child” for 2025 if all of the following apply:
- You’re under age 24 at the end of the year.
- You were a full-time student for at least five months of the year.
- You didn’t provide more than half of your own financial support.
- You lived with your parents for more than half the year (excluding time away at school).
If you don’t meet all those criteria, your parents might still be able to claim you as a “qualifying relative” if:
- Your gross income is less than $5,200, and
- Your parents provided more than half of your support during the year.
If My Parents Claim Me, Do I Still Have to File a Tax Return?
Most dependents still need to file a federal income tax return to report their earnings—even if they owe little or nothing. That’s because:
For 2025, an unmarried dependent can claim a standard deduction equal to the greater of:
- $1,350, or
- Earned income + $450, up to a maximum of $15,000.
For example, if you earn $25,000 and your standard deduction is $15,000, you’d have $10,000 in taxable income. With a 10% tax rate on the first $11,925 of taxable income, your federal tax would be $1,000.
Important: Earned income includes wages, tips, freelance work, and any taxable scholarships or fellowship grants.
Can I Deduct Student Loan Interest?
Yes, if you meet the income limits, you can deduct up to $2,500 of student loan interest paid in the year.
- Single filers: Deduction phases out between $85,000–$100,000 MAGI.
- Married filing jointly: Phaseout range is $170,000–$200,000.
Who Should Claim the Education Tax Credits—Me or My Parents?
There are two main federal tax credits for education:
1. American Opportunity Credit
- Worth up to $2,500 per year, for up to four years of undergraduate study.
- Covers 100% of the first $2,000 of qualified expenses and 25% of the next $2,000.
Qualified expenses include:
- Tuition
- Mandatory enrollment fees
- Course materials
To qualify, you must be enrolled at least half-time in a program leading to a degree. The credit can offset your entire federal tax bill. If any of the credit remains, up to 40% (max $1,000) is refundable.
2. Lifetime Learning Credit
- Worth up to $2,000 per year (20% of up to $10,000 in qualified expenses).
- No limit on the number of years you can claim it.
- No requirement to be enrolled half-time or in a degree program.
Ideal for part-time students, graduate students, or those taking longer to complete undergraduate studies. Room and board and optional fees don’t qualify.
Income Phaseouts for Both Credits in 2025:
- Single filers: $80,000 – $90,000
- Married filing jointly: $160,000 – $180,000
Who Should Claim the Credit?
If your parents’ income is below the threshold, it usually makes sense for them to claim the credit (especially if they’re in a higher tax bracket). If their income is too high and you’re eligible, you should claim the credit yourself.
Example: Percy, age 22, graduates in May 2025 and earns $25,000 that year. His parents provide more than half his support, so he qualifies as their dependent. Percy qualifies for the $2,500 American Opportunity Credit, which eliminates his $1,000 tax bill. He also receives a $600 refundable credit (40% of the remaining $1,500). Alternatively, if his parents qualify for the full credit, it may make more sense for them to claim it instead.
Welcome to Adulthood—And Taxes
From determining dependency status to maximizing education tax benefits, taxes can be tricky for new grads. The good news? There are smart ways to save—if you know where to look. For personalized advice tailored to your situation, consider working with a tax professional. It’s one of the best moves you can make as you step into this next chapter of life.