Whether this is your first time filing a tax return or your tenth, it never hurts to have some tips handy to help you along the way. This season, keep these 6 tax tips that are perfect for young adults in mind.
1. Deduct your student loan interest.
This is one of the top tax tips for young adults, as four in ten adults under age 30 have student loan debt. If you are one of them, you’ll likely be able to deduct the interest paid on your loans.
Wondering if this applies to you? The experts at Turbo Tax outline the following guidelines for qualifying for a student loan deduction:
- The loan you took out must have been solely to pay for higher education.
- You must have paid interest on the loan in the tax year.
- You have to be legally obligated to pay interest on a qualified student loan.
- Your filing status cannot be “married filing separately.”
- You must be a single filer with income under $65,000.
If you do meet those qualifiers, you can deduct your student loan interest. Your lender will provide you with a 1098-E form showing how much interest you paid during the year. You’ll need that information when you file, so if you haven’t received one from your lender, you may need to ask. You can also check your online account, as many lenders will make the form available to you there as well.
2. Don’t forget about summer jobs.
If you’re a recent college graduate, chances are you’ve worked a part-time job in the past year. Don’t forget to report any summer jobs when you file your tax return this year.
When you started, your employer most likely had you fill out a W-4 form. That means you’ll have taxes taken from your income throughout the year so you won’t have to pay it all at tax time. By the end of January each year, your employer is required to send you a W-2 form, which shows the amount of taxes withheld from your paycheck. You can then use that W-2 form to file your state and federal taxes.
3. Make sure you know your filing status.
There are five filing statuses to choose from, and it’s important that you choose the right one to ensure your return is correct. Your options are:
- Married filing jointly
- Married filing separately
- Head of household
- Qualifying widow(er) with dependent child
You’ll also want to check with your parents to see if they plan on claiming you as a dependent. If you’re under 19 or under 24 and a full-time student, and you live with your parents for more than half the year, they can claim you as a dependent. If they do, you’ll need to select the option of “I can be claimed on someone else’s return” when you file.
4. Update your name if it has changed in the past year.
Did you get married this year and change your name? Don’t forget to change your name on your social security card. Your IRS records must match up with your SSA records. Otherwise, you risk delaying your refund.
5. Take advantage of home tax deductions.
Many young adults dream of owning their first home. If you’ve taken the plunge this year and made your dream a reality, you’ll want to take advantage of home-related deductions.
As a homeowner, you can itemize your deductions to reduce your taxable income by deducting any interest paid on your home mortgage. You may also be able to deduct property taxes.
6. Know what to save for your records.
There’s a lot of paperwork that comes with doing taxes. When you’ve finally finished filling out all the forms and submitted your return, what should you keep for next year?
For starters, make sure you have a safe filing location for your paperwork that will make it easy for you to find come next tax season. Save copies of your returns and any related paperwork for at least three years — that’s how long your return is auditable. However, for “substantial errors,” the IRS maintains it can go back six years and recommends you keep most records at least that long.
Wondering what documents to save throughout the year to use next tax season? The Mint blog offers these record-keeping tips for taxes:
- Keep big-purchase documents for as long as the item is in use.
- Keep and review records of your investment losses from previous years.
- Log business mileage throughout the year.
- Collect receipts and records of any charitable donations.
Mercer Savings Bank: Here to Help
We hope this helps you during tax season! Just remember, everyone’s tax situation is different. If you have questions, you should talk to a tax professional.