The article below is accurate for your 2017 taxes, the one that you file this year by the April 2018 tax deadline. Tax information below will change next year for your 2018 taxes, but won’t impact you this year. Learn more about tax reform here.
Congratulations Class of 2018, 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 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, 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 estimate your taxes year round. You can also export this information to TurboTax Self-Employed eliminating entering your information 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. Be sure to keep your receipts for your education spendings 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 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.
*Note, the tax deductions for job hunting are only available through 2017 and beginning in tax year 2018 (the taxes you file 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 and give you the tax deductions and credits you’re eligible for based on your answers.