Graduating from college also means big life changes. And those changes could affect tax time too. Getting a refund during filing time and saving money are possible with the following steps prepared by The Southbourne Tax Group.
In case you don’t know but up to $2,500 of the interest portion of student loan payments can be tax deductible if your modified adjusted gross income is below $80,000 (for singles) and $160,000 (for married filing jointly).
Unfortunately, you can’t deduct your expenses on job hunting if you are looking for a work in a new career field or a full-time work for the first time. But there’s a possibility of tax breaks if you’re moving to a new city for your first job.
Each year, up to $18,000 can be secured from your income taxes if you contribute to your company’s 401(k) wherein you can also start your retirement savings. In addition, if you are enrolled in a high-deductible health plan, you could secure another $3,400 (for singles) and $6,750 (with family coverage) on your contributions to a health savings account. Putting your money into a flexible spending account can help you keep an additional $2,600 out of your taxable income as well.
Big deductions for business expenses could be claimed if you are planning to be your own boss or be a freelancer as a new college graduate. Southbourne Group advises that you should save at least 25% of what you’re earning for the IRS.
Lifetime Learning Credit is also a good thing to consider. You can claim up to $2,000 of tax credit per year for post-secondary work at eligible educational institutions. But this is possible if your modified adjusted gross income is below $65,000 (for singles) and below $131,000 (for married filing jointly).
Being able to save also brings different wonders such as cutting your tax bill. It is possible as well to qualify for the Saver’s Credit if you have an adjusted gross income of less than $31,000 (for singles) and $62,000 (for married filing jointly). Up to 50% of the first $2,000 and $4,000 you contribute to an eligible retirement plan can be reduced on your tax bill.
Getting tax software and a professional help from experts are good options to consider but make sure not to overspend on each. You can depend on free packages from many tax software companies if you have simpler tax situation. Volunteer Income Tax Assistance program could also be your choice if you want professional help.
We have our own ways of facing our taxes, but with those mentioned above, Southbourne Group hopes that you learn something that can help you move on with your taxes.