Congratulations on graduating college! Now that you’re done with school and ready to embark on life in the “real” world, it’s a good idea to get a handle on your tax situation.
Taxes may seem scary at first but with how easy tax software has made tax preparation, it’s just a matter of answering a few questions every spring. That said, it’s still good to be aware of a few tax tips so you can save money and learn how easy it is to do your own taxes.
Here are 4 things you need to know about taxes as a college grad:
1. Who Gets to Claim You as an Exemption?
Chances are that for the last few years your parents have continued to claim you as an exemption on their taxes. This exemption can be valuable and worth $3,900 in 2013. If you claim yourself, it means that $3,900 of your income isn’t taxable. If you are claimed as a dependent on your parents tax return, though, your parents get that benefit.
The question is whether or not your parents provided over half of your support. Your age and status as a student also matters. If you are under 24, or a full-time student for at least five months of the year, your parents might be able to claim you.
That means that if you graduated in May, and if your parents have been supporting you, you won’t get the exemption.
If you are older than 24, or if you are younger but provide most of your own support (this is common if you are married, or if your parents don’t help you with school), you can claim your own exemption. Be sure to check with your parents and find out what they plan on doing.
2. Moving Expenses Deduction
If you have landed your first post-university job, you can claim expenses for moving. As long as your new employer isn’t reimbursing you for your moving expenses, you can deduct them on your taxes. And, because this is an “above the line” deduction, you don’t have to itemize deductions to qualify.
There are, however, some requirements if you want to take this deduction:
- You have to move at least 50 miles.
- You need to work 39 weeks full-time during the 12 months following your move.
- You can deduct mileage on your car, and the amount you pay for packing materials, as well as the costs involved in renting a truck (including gas). It’s also possible to deduct what you pay for lodging, even though you won’t be able to deduct meals.
3. No Deduction for First Job Hunt Expenses
When you apply for a job in the same field as your current job, you may have read that you can deduct your job hunt expenses. Unfortunately, you don’t get a deduction for the expenses incurred for looking for your first job. So don’t plan on deducting those costs.
4. Deduct Your Student Loan Interest
Now that you are done with school, you may have to start paying back some of your student loans. When you make student loan payments, they will include an amount paid for interest.
This interest is tax deductible, as long as you can claim your own exemption. It’s possible to deduct up to $2,500 in student loan interest each year and this lowers your taxable income.
As of 2013, there is no limit on the number of years you can claim this deduction but there are income phaseouts, though, so you have to pay attention to those levels. But, for many college grads, the student loan interest rate is good for at least a couple years’ worth of deductions.