Graduating from college can be an exciting and stressful time in your life. Between trying to find a job and a new place to live and leaving the safety net of college life, it can feel like you’re trying to juggle with medicine balls. The financial pressures around this period of time can be immense. The good news is that you can take some pressure off your poor wallet with tax breaks and credits.
At Hacker Accounting, we know how college grads can benefit from their taxes. The government knows how hard it can be for graduates to establish themselves, and how crucial it is for our economy that they do so. That’s why there are several different tax credits, breaks, and benefits available for grads to take advantage of. Here are some of our top college grad tax tips for the recently graduated.
Student Loan Interest
As soon as you can claim your exemption, you can also deducting the interest you pay on your loans! You’re able to write off up to $2,500 a year in interest on student loans. You can qualify for this deduction even if your parents pay interest on a loan that you’re liable for. You can do this by filling out Form 1040A or 1040 to claim the interest paid. This deduction phases out at higher income levels, though. The deduction is eliminated when it reaches $75,000 for unmarried individuals and $155,000 for married couples filing jointly.
You can write off the unreimbursed costs of moving for your first job. So long as your job’s location isn’t within 50 miles of your old home or the university where you resided, you can deduct your moving expenses. Be sure to track what you paid to pack and ship your household belongings to your new place and also include the cost of shipping a car or pets if you move either of them. If you drive your own car for the move, you can deduct 19 cents per mile, plus any tolls AND the cost of lodging on the way.
The bad news is that you can’t deduct the expenses of hunting for your first job post-graduation. The good news is that you CAN deduct the costs of searching for another job in that same line of work! Make sure to keep receipts for any expense related to job hunting, especially mileage.
Lifetime Learning Credit
Just because you graduated doesn’t mean that you have to stop learning. You can apply for the Lifetime Learning Credit to help cover the costs of your post-secondary education. It’s worth 20% of up to 10,000 you spend a year for education and it can provide a maximum credit of $2,000 per year. And unlike the American Opportunity Credit, you do not have to be working toward a degree. You could be taking a single class and still be able to apply for this credit. Added bonus is that there is no limit on the number of years you can claim this credit.
Annual Gift-Tax Exclusion
Are you receiving money from your family to help you get on your feet post-graduation? If so, you and your family could take advantage of the federal gift tax. Each year, anyone can give any individuals up to $14,00 without even having to file a gift-tax return. And in the event that the gift tax needs to be paid for gifts in higher amounts, the gift tax is owed by the giver of the gift, not the recipient.
Recent: Best Tax Tips For New Employees
Looking for more tax tips? Give Hacker Accounting a call at 602-375-5251.