Listen Up Millennials: Tax Tips for Your Biggest Refund
November 9 2016
As a millennial, you’re probably in the middle to late stages of starting your career, with some student loans, perhaps on the lookout for a better job, and may even have a mortgage. Like other age groups, there are some tax credits and deductions that suit your particular circumstances. Read below, and learn how to take advantage of them for your biggest refund yet.
Tax Tips for Your Biggest Refund
Earned Income Tax Credit
If you have kids, read on. Since 1975, the Earned Income Tax Credit has been one of the most substantial tax credits available. This credit is determined by income and phased in according to filing status. Eligibility and credit amount is based on adjusted gross income, invested income, and earned income. Marrying filing separately and self-employed income do not qualify; you must be 25 to 65 years of age. You can get up to $6,242, if filing with three qualifying children.
Saver’s Credit
This one is for millennials in the low to moderate income bracket, that are saving for retirement. Depending on your adjusted gross income and filing status, you can receive credit for the first 10%, 20%, or 50% of the first $2,000 you put into retirement. Therefore, you can receive a credit of $200, $400,or $1,000. A married couple filing jointly can claim up to $2,000. Although one of the more broad and easily attainable credits, this one is non-refundable, meaning it can reduce your tax bill to zero, but won’t garner a refund.
Student Loan Interest Deduction
We bet you have a bit of student loan debt. You can claim all interest paid as a deduction for up to $2,500. An added bonus: this goes for required and voluntary payments, so the more you pay, the more you can deduct. However, there are income restrictions. You can claim the full $2,500 if your adjusted gross income is less than $65,000, and the deduction gradually decreases as you go up to $80,000. If you make more than that, you cannot claim a deduction.
Charity Deduction
Have old stuff from college laying around? Donating to charity both warms your heart and can boost your tax return. If you’re claiming this deduction, ue the IRS tool to see if the charity is eligible. There are also other rules, like obtaining written consent for cash donations over $250, and keeping records.
More Tax Tips for Getting Your Biggest Refund
Lifetime Learning Credit/American Opportunity Tax Credit
First enacted in 2009, and now extended to 2017, the American Opportunity tax credit applies to the first four years of post-secondary education. The qualifications have opened up to taxpayers ranging from those who do not owe tax to those with higher incomes, up to $80,000 for individuals and $160,000 for married couples filing jointly. Many will qualify for the maximum annual credit of $2,500.
The Lifetime Learning Credit amounts up to $2,000, for individuals earning less than $64,000 and married couples filing jointly earning less than $120,000. Students do not necessarily have to be working towards a degree, with no limit to the number of years that it can be claimed. You are only eligible if no one can claim you as a dependent. These credits are nonrefundable and one student cannot claim both in the same tax year.
Moving Expense Deduction
If you move to a new town for a new job or your company relocates you, the expenses incurred can be deducted. The IRS is even more generous – you can still deduct moving expenses if you’re self employed or if you’re fired from the job you moved for. The two things taken into consideration are distance and time. Your new job must be 50 miles farther than your old commute. If you’re self-employed and work from home, you only need to move 50 miles away.
As for time, you must be employed for at least 39 weeks of the next 12 months after the move, or 78 weeks of the next 24 months if you’re self-employed. So what can you deduct? Packing, shipping, 30 days of storage, travel (including gas), hotel rooms, and disconnecting/reconnecting utilities. The best thing? You don’t have to itemize these deductions and there is no limit!
Job Hunting Deductions
Speaking of jobs and deductions, you can deduct many expenses that directly relate to your job search. Expenses include resume preparation costs, travel expenses (job fairs, out of town interviews), mailing fees, agency fees, and more. In order to claim these deductions, you must itemize and continue your job search in the (roughly) the same field as your previous job.
Mortgage Interest and Premiums
If you’re unlike many of your fellow millennials and own a home, you’re in luck. This deduction goes for your primary and secondary residence (which doesn’t even have to be a house). There are limits, but few taxpayers reach it. Further, you can deduct the interest on up to $100,000 borrowed on a home equity loan or home equity line of credit.
Get Your Biggest Refund
Ready for your biggest refund yet? Combining just a few of these tax benefits can bring in serious cash. Take advantage of what you can before April!
Comments
