I remember my college graduation like it was yesterday. Although I had to say goodbye to all of my friends, I knew that it was a huge stepping stone towards my future … and a taste of the real world.
Nothing can really prepare you for life after college, especially when it comes to taxes. We all have to grow up some time, but many college graduates may be unaware of what tax laws exist and apply to them. Here’s a few that you should definitely take advantage of.
- Student loan interest. You’ve earned your education … literally, meaning that in a few months after graduation you will begin paying off your student loans. Interest that you pay on qualifying student loans is tax deductible. They must have been used solely for educational purposes, and if you pay $600 or more on the loan, expect to receive Form 1098-E from your lender. More information can be found in IRS Publication 970.
- Job search costs. If you’re looking for your first job, you can’t deduct your job-hunting expenses. However, if you are already employed and are looking for a new job in the same line of work, money spent on printing resumes, employment agency fees, and other items assisting you in your job search can be deductible. These expenses must be greater than 2 percent of your adjusted gross income.
- Moving costs. Your moving expenses can also be deducted for relocating for a new job, regardless of whether it’s your first one or not. Check out IRS Publication 521 to see if you can qualify for this deduction.
- Retirement contributions. Once you have landed your new job, begin contributing to an IRA or your employer’s retirement plan right away. Each tax year, the IRS allows you to deduct some of what you contribute to a retirement plan. Your savings can also reduce your taxable income thus lowering your tax bill.
- Emergency fund. While it’s important that you put money aside for your future, it’s also important to put money aside for emergencies. Keeping an emergency fund of 9 months to a year’s income will provide some cushion in case you experience a slight setback.
- Military. Are you entering the military? Active duty military members qualify for several tax advantages, such as untaxed combat pay, family and home deductions, and educational credits. In addition, members of the military reserve forces and National Guard also receive tax benefits, including mileage deductions for unreimbursed, work-related travel expenses. Visit the IRS website or your tax preparer for more details on military tax deductions.
- Child care. While you’re working, leaving your kids in daycare works in your favor at tax time. The child and dependent care credit allows you to claim expenses paid towards qualifying daycare and summer camps.
A huge congrats to all the students who are graduating this year!
For answers to your tax questions, locate your nearest Liberty Tax office using our office locator or by calling 1-866-871-1040.
Disclaimer: 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.