Congratulations Class of 2016, you did it! While graduation is a major milestone that should be celebrated, it is also a time to prepare, both mentally and financially, for your shift into the ‘real world’.
As you transition into this next phase of your life, here a 5 financial tips that will help you manage your money and taxes.
Take Charge of Your Situation. As soon as you go out on your own and start earning a full-time income, start taking responsibility for your obligations. This means doing things like adjusting your W-4 and understanding your withholding, making estimated tax payments if you’re self-employed or working as a contractor, and keeping accurate records of deductible expenses.
Open a Tax Advantage Savings Account. One of the best things you can do for yourself financially is to open and start contributing to tax advantaged retirement savings accounts (i.e. 401K, Roth IRA). These accounts serve the dual purpose of helping you get prepared for your financial future, and helping you save money on your taxes, both now and in the future.
Take Advantage of Education Tax Benefits. Don’t forget to take advantage of the education tax benefits available today. You may have had some qualifying education expenses earlier this year, or you may still be incurring expense due to graduate work. Be sure to keep your receipts for your education spending like tuition and fees, books, supplies and equipment so you can take advantage of education tax credits and deductions available at tax time.
Don’t Forget the Student Loan Interest Deduction. Once you graduate you’ll probably be required to start making regular payments on your student loans. Interest on the loans will make up a large amount of those payments, however you can deduct that expense when filing your taxes. A maximum of $2,500 can be deducted, and your lender will send you a Form 1098-E to let you know what your total interest deduction is.
Deduct Job Hunting and Moving Expenses If You Can. Speaking of deductions, two of the more common deductible expenses for people in transition are the job hunting expenses and moving expenses. Unfortunately, as a college grad, you may not be able to deduct your job hunting expenses since your hunt for your new job has to be related to your old profession, however you should be able to deduct the expenses related to moving for the sake of a job if your move is more than 50 miles from your old home. Keep records of expenses related to the move including mileage, moving truck rental, lodging, and more.