Standard Deduction for Dependents: Do Students Pay Tax?
“I made $5,000 at my summer job. Do I owe the IRS?” Probably not. But if you trade crypto or stocks, the rules get weird fast. Here is the 2026 tax cheat sheet for students living off their parents.
Job Income
~$15,500
Tax Free LimitSafe
Investments
~$1,350
Tax Free LimitWarning
Refund?
Yes
If W-2 WithheldFile
How Much Can You Earn Tax-Free?
If your parents claim you as a “Dependent,” you don’t get the full Standard Deduction automatically. You get a calculated amount.
| Income Source | The Rule (2026 Est.) | Deduction Amount |
|---|---|---|
| Scenario A (No Job) |
Minimum Amount | $1,350 |
| Scenario B (Job: $6,000) |
Earned + $450 | $6,450 |
| Scenario C (Job: $20,000) |
Max Limit (Single) | $15,500 |
What does this mean?
In Scenario B, you earned $6,000. Your deduction is $6,450.
Income ($6,000) – Deduction ($6,450) = $0 Taxable Income.
You pay zero tax.
Income ($6,000) – Deduction ($6,450) = $0 Taxable Income.
You pay zero tax.
Do You Need to File?
Warning: The “Kiddie Tax” (Stock Traders Beware)
The IRS hates it when rich parents hide money in their kids’ accounts. So they created the “Kiddie Tax.”
If you are a student (under 24) and have “Unearned Income” (Interest, Dividends, Capital Gains) over approximately $2,700:
- The Penalty: That money is taxed at YOUR PARENTS’ highest tax rate (e.g., 37%), not your low rate.
- Example: You sold Bitcoin and made $5,000 profit. The first $1,350 is tax-free. The next $1,350 is taxed at your rate (10%). The remaining $2,300 is taxed at Mom & Dad’s rate (ouch).
Pro Tip: Get Your W-2 Refund
“I made $5,000. I don’t owe tax. Why should I file?”
Check Box 2
Look at your W-2 form from your employer.
Does Box 2 (Federal income tax withheld) have a number? (e.g., $300).
That means they took $300 from your paycheck and sent it to the IRS “just in case.” Since you owe $0 tax, the IRS owes you that $300 back.
The ONLY way to get the check is to file a tax return. It takes 15 minutes on FreeTaxUSA. Do it.
Does Box 2 (Federal income tax withheld) have a number? (e.g., $300).
That means they took $300 from your paycheck and sent it to the IRS “just in case.” Since you owe $0 tax, the IRS owes you that $300 back.
The ONLY way to get the check is to file a tax return. It takes 15 minutes on FreeTaxUSA. Do it.
Frequently Asked Questions
Does my scholarship count as income?
It depends. If used for Tuition/Books = Tax Free.
If used for Room & Board (Dorm/Food) = Taxable Income. You must report the housing portion as income on your tax return.
Can I claim myself if I file?
No. If your parents *can* claim you (because they pay >50% of your support), you must check the box “Someone can claim me as a dependent.” You cannot claim your own personal exemption.