Graduating from college can be an extremely exciting time. Grads prepare for new jobs and have lots to think about with their upcoming adventures, but many may forget about things like taxes. Here are some of the top tax topics grads should remember to pay attention to.
- If a parent has claimed them in the past, is it time for a change? With a new job, the grad may be taking care of their own costs of living now.
- There are tax breaks for paying student loan interest. Be sure to be up to date on the rules and qualifications.
- Earning a graduate degree or continuing education while also working full time may qualify you for a tax credit. The Lifetime Learning Credit is often a common credit taken. Some employers also have employer-provided educational assistance programs that may qualify to be excluded from income.
- Make retirement account contributions as early as possible! Also be aware of the options that an employer may offer when it comes to retirement accounts. Contributions may even be tax deductible!
- Be aware of options and qualifications for contributing to a Health Savings Account (HSA) or Flexible Spending Account (FSA).
- Large cash graduation gifts may be taxable. If the amount is over $15,000 in the year of 2018 or 2019, there are some tax implications. If the amount is less than that, then the gift is not taxable to the recipient or giver.
- Self-employed graduates should make sure to keep track of all business-related expenses and should be aware of estimated taxes & self-employment taxes.
- Before 2018, costs related to moving for a new job could have qualified for a tax deduction, however this deduction is no longer available, unless you are a member of the armed forces.
- Some grads may not start a new full-time job until half way through the year, so they should ask their employer if there is an option for part year withholding. When starting mid-year, without taking this extra precaution to adjust accordingly, your withholdings could be overstated.
- Always make sure to keep a file of all tax related documents. Including any W-2s, 1099s, and 1098s. This way, your tax professional can have all the documents they need when preparing your return when tax season comes around!
If you have any questions or need more clarification, as always, you can contact your Henry & Horne tax advisor.