Helpful tax deductions for young adults

Many young adults struggle to make ends meet their first few years after graduating college. Some may be making an entry-level salary and trying to carry the costs of rent, auto payments and student loans on top of their day-to-day expenses. So when filing season rolls around, it's important for young taxpayers to take advantage of credits and deductions that may ease their tax burden.

Student loans can take a chunk out of a young adult's income, but some may not be aware that they can deduct the interest on their payments, even if their student debt is being paid by their parents. As long as individuals are not being claimed as a dependent on their parent's taxes, they can deduct up to $2,500 in student loan interest without itemizing their taxes.

In addition, many young adults who are switching jobs or looking for a new position in the same industry in which they currently work can deduct some of the expenses associated with their employment search. For example, these costs include postage, phone calls made to potential employers, career placement services, resume printing and any travel, food and lodging expenses associated with interviewing for a position. However, in order to deduct these costs, the overall costs must exceed 2 percent of the taxpayer's adjusted gross income and must be itemized as miscellaneous expenses on their tax forms. Keep in mind however that job hunting expenses for young adults looking for their first position are not deductible.

Lastly, adults who relocate to take a new position can deduct their moving costs from their taxes, easing some of the financial burden associated with hiring movers, buying packaging and boxes and traveling long distances. During the first half of 2011, that is January 1 through June 30, the standard mileage rate that movers can deduct is 19 cents per mile. This amount increases to 23.5 cents during the second half of the year. In order to qualify, a taxpayer's new workplace must be at least 50 miles further from their old home than their previous office was from their former home. In addition, employees must work at least 39 weeks during the first 12 months of their arrival to qualify.

These deductions can be helpful in lowering a young adult's tax liability, but there are rules and restrictions that may apply to each. For this reason, individuals may benefit from enlisting the assistance of a tax preparer in order to make sure they fall in line with the eligibility rules.

Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

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