Congratulations, Class of 2019 — 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 are 5 financial tips to help 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, it’s time to 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 tax-deductible expenses.
If you dive into self-employment, QuickBooks Self-Employed can help you easily track your business income, expenses, deductible mileage, and help figure out your quarterly estimated taxes year round. You can also easily export this information to your TurboTax Self-Employed tax return and eliminate entering your information again at tax time.
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 expenses due to graduate work. Make sure you download or receive the 1098-T form that shows tuition paid during the school year/semester. Be sure to keep your receipts for your education expenses like tuition and fees, books, supplies, and equipment so that 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 interest when filing your taxes. Up to $2,500 can be deducted. Your lender will send you a Form 1098-E reflecting the total interest paid over the year.
File A Tax Return: You’ll want to file a return even if your income is below IRS filing requirements if you had federal taxes withheld from your paychecks since you may be entitled to a tax refund. Especially if you’re eligible for a refundable tax credit like Earned Income Tax Credit. Every year, the IRS reports over $1 billion in unclaimed tax refunds and the average unclaimed tax refund is more than $800, but you have to file your taxes in order to get your tax refund.
*Note, a few tax deductions that may have been relevant to you have been eliminated under tax reform, like tax deductions for job hunting (only available for tax year 2017 and previous years). Beginning in tax year 2018 (the taxes filed in 2019), only members of Armed Forces on active duty are allowed to deduct moving expenses.
Don’t worry about knowing these tax benefits. TurboTax will ask you simple questions about you and give you the tax deductions and credits you’re eligible for based on your answers. If you have tax questions, you can connect live via one-way video to a TurboTax Live CPA or Enrolled Agent and get your tax questions answered. TurboTax Live CPAs and Enrolled Agents are available in English and Spanish and can also review, sign and file your taxes.