Later this month, thousands of college students will walk across a stage to receive their diplomas and take their first step into the world of adulthood. For most, this means demanding careers, bills and responsibilities. Managing their finances the first year after college is a learning curve for most young adults, and many may not even be thinking about filing their taxes in January. However, that first time filing after college can seem intimidating for individuals, and taking some time to plan ahead can lessen the shock, help them avoid mistakes and encourage them to start keeping records for credits and deductions for which they may qualify.
While many may think it's too soon to set up a meeting with a tax preparer, doing so in the months following graduation can be a smart idea, because professionals can enlighten young adults on the benefits they may be eligible for and educate them on the type of documents and statements they should save. For example, borrowers who took out students loans to finance their education may be entitled to a deduction on the interest they pay. Individuals can write off up to $2,500 in student loan interest each year, even if their parents paid the interest for a loan in the student's name, Kiplinger magazine reports.
Deducting job-related expenses
Many recent graduates may look for certain write-offs related to their employment, but it's important to understand that not all job-related expenses are available to first-time job seekers. For example, seasoned individuals who have held prior employment may deduct the costs of resume services, printing cover letters, traveling for interviews and even making phone calls to prospective employers. However, this deduction is only available to those looking for a job in their same industry, meaning that new job seekers who have never held a position before may not apply.
On a positive note, those relocating for a new job, be it their first position or not, may write off their moving expenses on their taxes. This includes transportation, boxes and packing materials and other costly endeavors related to the move. However, it's important for adults to keep in mind that only those expenses that will not be reimbursed by their new boss can be written off. There are also two tests individuals must pass in order to claim the deduction. First, new hires must pass the 50-mile test. Under this rule, the new job and the taxpayer's former home must be at least 50 miles greater than their old commute. For example, if young adults previously lived 20 miles from work and their new job is 60 miles away from the former house, they will not qualify for the deduction because there is only a 40-mile difference. On the other hand, if their new job is 80 miles away from their former home, they easily meet the 50-mile threshold.
The other test requires that new hires are employed in their new location for at least 39 weeks during the 12 months after they made the move. However, individuals should note that they don't necessarily have to be employed with the same company during this period to meet the test.
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