Tax Tips for Recent College Graduates
Tax Tips for Recent College Graduates
Recent graduates often lack the guidance and resources necessary to navigate through the many tax-related decisions they may face as they begin their careers. If you or someone you know is a recent graduate, the following tax tips may be helpful to consider:
- Be sure to coordinate with your parents upon entering the workforce, as they may have been claiming you as a dependent in previous years.
- Take advantage of the student loan interest deduction. For 2020, you may deduct the lesser of $2,500 or the amount of interest you actually paid during the year, subject to income limitations.
- Start contributing to a retirement account to get a head-start on your retirement savings and potentially lower your income tax liability. If your employer doesn’t provide a 401(k) or similar retirement plan, consider contributing to a Traditional or Roth IRA.
- If your employer-provided health insurance plan is considered a ‘high deductible’ plan, consider opening a health savings account or flexible spending account.
- Students often work part-time jobs with rideshare or third-party food delivery companies. Be sure to keep records of business-related expenses, including mileage you place on your vehicle, which may be deductible if you are self-employed.
- Starting a job mid-year could result in over-withholding of federal and state income taxes. If you’re a newly employed graduate, be sure to check with your employer to see if part-year withholding is available.
- Keep an organized file of tax-related documents.
The Tax Code can be complex and difficult to navigate, especially for recent graduates. As such, you should examine any tax planning options thoroughly before initiating action. We are happy to discuss these with you and tailor a tax plan that will work best for you.