Hey all,
Its that time of the year. Was doing my taxes and realized how much I am paying in taxes.
I intend on maxing out my 401k this year but was wondering if there are other tax deductions that are worth taking? I am 25 so not sure if a 529 plan is even worth considering.
I take the whatever the personal exemption is and that's about all. Other than that I do Roth for 401k and IRA, and contribute to an HSA which is nice and shields a bit of income from taxes for medical expenses. Outside of the obvious ones, I hate to tell you that as a single young person there isn't much going your way when it comes to tax write-offs.
2012 Tax Deductions for Recent Grads (Originally Posted: 01/19/2013)
WSO,
I think it's a good idea to have a thread that outlines the most effective ways to reduce 2012 taxable income for recent grads.
I only have the general and most common ideas here, but I was hoping maybe people could chime in with their "not-so-well-known" deductions.
Here are some of the most common deductions: - Student loan interest deduction: you should receive form 1098-E from your student loan servicing firm
Moving expenses deduction for when you move to a new place for your first gig out of school. For more info on what you can claim: http://www.irs.gov/publications/p521/ar02.html
Charitable donations (I doubt many recent grads have to worry about this)
Business travel deductions: for when your employer doesn't pay you back
Lifetime Learning Credit: you can claim the credit for any post-secondary classes you take; you don't have to be working towards a degree. Some limitations do exist though. If you earn too much income during the year, you may not be eligible to claim the credit. At the end of the year, your educational institution should send you a Form 1098-T that reports your eligible costs. To claim the credit, enter those figures on Form 8863
Hope this list helps you maximize your tax returns this year.
Yes for all those people that have gone through this, please help the newly employed out!
What tax program should I use to even do it? Best/worst?
I'm going to use turbo-tax. That's what I have always used. If I run into any snags, I may call my parent's tax accountant, but the process seems relatively painless.
I'll second TurboTax. Used it for a number of years now and it's great.
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used turbotax before now see taxtact a cheaper alternative
The learning credit is HUGE! especially considering you will be working only a partial year you will have a refund coming and the credit is money straight to the pocket....
Also I would be careful how you deduct job hunting expenses there is some underlying IRS language that says undergrads don't count.. You have to be looking for a new job in your industry... not your first job
Current college students as well please!
Pretty sure you can deduct stuff like dry cleaning on 'business expense' grounds if you are really trying to pinch pennies/don't get reimbursed for it. I vaguely remember that from last year but maybe I'm wrong. If you're like me and have to wear a suit a lot then those expenses add up.
That's not true. Dry cleaning is only deductible if your business uniform "is not suitable for everyday use". This has been applied pretty broadly, so any normal shirt, pants, ties, etc... are not deductible. I doubt there's really anyone on this board that can deduct dry cleaning.
I use taxact, it's cheaper than turbotax and just as easy to use.
The one problem with the Lifetime Learning deduction is most people coming out of undergrad into a job in finance will be immediately ineligible. Anyone making over ~$60K or something can't take an LLC deduction... and I'm pretty sure there's a cap on it anyway at the retardedly small amount of $2K. So if you're paying $25K in tuition, you can only write off $2K against it via the deduction. It's aimed at helping out low income people, as is everything else.
If you started your analyst stint in July, you would still be eligible, since your income is only for 6 months. Next year would be a problem though.
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