How is student intern pay taxed? Filing as dependent vs independent for summer internship

Your filing status doesn't actually change how your intern pay is taxed - that income will be taxed the same either way. What matters is whether you qualify as a dependent or not based on IRS rules. For 2025 taxes, you're a dependent if you're a full-time student under 24, living with your parents for more than half the year, and they provide more than half of your support. That $42,000 summer income might actually disqualify you as a dependent since you'd be providing significant self-support. If you file independently (and you're not a dependent), you'd get your own standard deduction (around $14,600 for 2025) which shields that much of your income from taxes. If you're a dependent, your standard deduction is limited to either $1,300 or your earned income plus $400 (max $14,600). The bigger question is the overall family tax situation - sometimes it's better for parents to claim you, sometimes better for you to claim yourself. It depends on your parents' tax bracket compared to yours.

I went through exactly this when I had a high-paying tech internship during college! I found this amazing tool called taxr.ai (https://taxr.ai) that really helped me figure out my situation. It basically analyzed my specific situation and showed me the tax difference between filing as dependent vs independent. For me, it turned out filing independently saved about $2,300 because I got to claim my own standard deduction AND some education credits my parents couldn't use because their income was too high. The tool helped me understand that even though my parents lost claiming me, they were in a high enough bracket that the education credits were being phased out anyway. It also helped me understand how my stipend was taxed differently than my salary (some stipends can be tax-free if used for qualified educational expenses).

Just wanted to update - I tried that taxr.ai site and it was actually super helpful! I entered all my weird income situations (internship, scholarships, side hustle) and it showed me that filing independently would save me about $1,850 while my parents would only lose about $500 in benefits. The coolest part was seeing how my stipend is partially tax-free since I'm using it for educational expenses. I didn't even know that was a thing! It also recommended keeping track of all my qualified education expenses since I can use those against the taxable portion of my scholarships. My dad and I went through the numbers together and he agreed it makes more sense for me to file independently this year. Definitely recommend checking it out if you're in a similar boat!

If you decide to contact the IRS to get clarification on any of this, good luck getting through! I spent HOURS on hold trying to ask a similar question about my internship stipend last year. Eventually found this service called Claimyr (https://claimyr.com) that somehow got me connected to an actual IRS agent in about 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was able to confirm directly with the IRS that my research stipend qualified as tax-exempt since it was going toward my educational expenses, which saved me about $3,400 in taxes. The agent also explained exactly what documentation I needed to keep in case of an audit. Worth checking out if you need definitive answers - sometimes the online advice can be confusing or contradictory, especially for unique situations like internships with stipends.

I need to eat my words. I tried Claimyr today after spending literally 4 hours trying to reach someone at the IRS about my internship income question. Got connected in about 20 minutes. The IRS agent confirmed that in my case, I definitely should file independently since my internship + side gig income provided more than 50% of my support for the year. She also explained that my parents and I should coordinate so we don't both try to claim education credits for the same expenses. Really specific advice that saved me from potentially making a mistake on my taxes. Sometimes you need to hear it directly from the IRS to be sure, especially with all the conflicting advice online. For anyone in a similar situation - it's worth getting a definitive answer.

Quick tip from someone who's done three summer internships: Your company should give you options for your W-4 withholding. Since internships are temporary, the default withholding often takes out WAY too much (like they assume you'd make that same amount all year). You can adjust your withholding to account for the fact you're only working a few months. Otherwise, you'll have way too much withheld and have to wait for a refund next year. I made this mistake my first year and had like $4k withheld unnecessarily.

Don't forget about state taxes too! Had an internship in California while being a resident of Texas and got absolutely blindsided by CA state taxes that took like 9% of my intern pay even though I was only there 12 weeks.

This is such a common confusion for students! One thing that hasn't been mentioned yet is that you should also consider whether you'll have any education expenses this year that could qualify for tax credits like the American Opportunity Tax Credit (AOTC). If you file independently and have qualifying education expenses, you might be able to claim up to $2,500 in credits yourself. But if your parents claim you as a dependent, they get to claim those credits instead (assuming their income isn't too high). The AOTC phases out for higher-income taxpayers, so sometimes it's more valuable in the student's hands. Also, make sure you understand how your stipend is classified. Some internship stipends are considered wages (subject to payroll taxes), while others might be considered fellowships or scholarships (which have different tax treatment). Your employer should clarify this on your tax documents. The key is running the numbers both ways - total family tax liability with you as dependent vs. independent - and seeing which scenario saves the most money overall for your family.