Moving forward from being a student to a graduate can be a strenuous experience. After graduation comes job hunting, and then next thing you know, you're receiving your first ever post grad paycheck. You will encounter new financial decisions that are crucial to a successful financial life.
Here are some very useful tax tips for new graduates like you:
Tax credits can be equal to or 20% of the first $10,000 from tuition paid, fees required and other certain expenses during the calendar year. Even if you don't qualify for it, you'll still be able to claim "tuition and fees deduction" for qualified educational expenses paid in connection with enrollment during academic term. Take note, this offer is not available if your married and filing separately or if someone else has already claimed an exemption for you as dependent. Higher level incomes also phases out this deduction.
Your options include:
Roth IRA - The lifetime of the investment grows tax free and you can pull out your money before you retire without getting hit with a penalty. Income should be no more than $110,000 however.
Traditional IRA - When you contribute your money to a traditional IRA, you take an income tax break and you are only taxed when you take distributions from your account. You can take out distributions without penalty starting when you are 59 years old and 6 months.
Savers Credit on Contributions - You may get tax returns of up to $2,000 from your IRA contributions when you claim the Savers Credit. This applicable if you are individual taxpayer of legal age with an income of up to $30,500. It won't apply though if you're a full time student during the year or if you have been claimed as a dependent.
401(K) - Take the golden opportunity should your employer offer you a 401(K). This will not only help lower your overall taxable income for the year, it will also jumpstart deferring tax from your income until a later period.
Remember, when it comes to taxes, saving as much documentation such as receipts can maximize your possible deductions. If you are required to move no less than 50 miles to take on a job, expenses may be tax deductible. These little details that may seem like too small to declare can add up and become a contributing factor to lowering your yearly taxes. However, there's no better way to fully take advantage of tax reductions than to get a tax professional to assess your unique financial situation to help you streamline your tax and credit needs.
Sources:
http://www.curadebt.com
http://www.irs.gov/retirement-plans/individual-retirement-arrangements-iras-1
http://www.investopedia.com/ask/answers/080816/are-student-loans-taxdeductible.asp
Here are some very useful tax tips for new graduates like you:
Tip #1 A Tax Professional Can Help
One important matter is to never neglect your taxes and credits. Sorting out the paperwork, laying down the figures, writing down tax deductions and other specifics can be a tedious and grueling job. Tax laws change often and each's financial situation differ. Because factors vary, it is an excellent idea to speak with an experienced tax professional before filing your income tax return.Tip #2 Take Advantage of Tax Credits
Everyone single and less than 65 years old who make more than $10,300 will need to file taxes. It is also important that you are no longer declared as dependent by your parents before filing your own taxes. You will be able to take advantage of tax credits if your most of your expenses are paid by yourself too.Tip #3 Check Your State's Website
Remember to check your state's website first before anything else. Some states allow filing of state returns for free. You can also see several options available.Tip #4 You May Qualify for Student Loan Interest Deduction
Congratulations new graduate! Unfortunately, many will be continue to be burdened by student loan debt. The good news is that you may qualify for a student loan interest deduction. After receiving a 1098-E from your school, your interest paid can be subtracted from your total earnings as adjustment. This will lower your adjusted gross income.Tip #5 Take Advantage of HSA
If your employer offers a health savings account (HSA), take it. Contributions will be carried over to future years and can be tax-free if used for health expenses. Deposits are up to $6,150 per year, tax-deductible.Tip #6 Lifetime Learning Credit
Tuition and Fees Deduction or the Lifetime Learning Credit is available for post-graduation college courses you take. Aside from your tax savings, you can increase your value to employers.Tax credits can be equal to or 20% of the first $10,000 from tuition paid, fees required and other certain expenses during the calendar year. Even if you don't qualify for it, you'll still be able to claim "tuition and fees deduction" for qualified educational expenses paid in connection with enrollment during academic term. Take note, this offer is not available if your married and filing separately or if someone else has already claimed an exemption for you as dependent. Higher level incomes also phases out this deduction.
Tip #7 Think About Retirement Right Away
Although it's not really a requirement, looking into retirement options sooner has its advantages.Your options include:
Roth IRA - The lifetime of the investment grows tax free and you can pull out your money before you retire without getting hit with a penalty. Income should be no more than $110,000 however.
Traditional IRA - When you contribute your money to a traditional IRA, you take an income tax break and you are only taxed when you take distributions from your account. You can take out distributions without penalty starting when you are 59 years old and 6 months.
Savers Credit on Contributions - You may get tax returns of up to $2,000 from your IRA contributions when you claim the Savers Credit. This applicable if you are individual taxpayer of legal age with an income of up to $30,500. It won't apply though if you're a full time student during the year or if you have been claimed as a dependent.
401(K) - Take the golden opportunity should your employer offer you a 401(K). This will not only help lower your overall taxable income for the year, it will also jumpstart deferring tax from your income until a later period.
Final Thoughts
Remember, when it comes to taxes, saving as much documentation such as receipts can maximize your possible deductions. If you are required to move no less than 50 miles to take on a job, expenses may be tax deductible. These little details that may seem like too small to declare can add up and become a contributing factor to lowering your yearly taxes. However, there's no better way to fully take advantage of tax reductions than to get a tax professional to assess your unique financial situation to help you streamline your tax and credit needs.Sources:
http://www.curadebt.com
http://www.irs.gov/retirement-plans/individual-retirement-arrangements-iras-1
http://www.investopedia.com/ask/answers/080816/are-student-loans-taxdeductible.asp
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