Sunday, June 22, 2008

Gimme a (tax) break

Continuing in the tax vein, there are specific steps that 20-somethings (especially recent college grads) can take to shelter portions of their income from being taxed, and inevitably save more money! In order to start saving anything, though, you'll need to remember to file your taxes! I honestly can't believe how many 20-somethings I know who feel they can't be bothered to file because they'll only get back a small amount (say $100 or $200). Either that, or they rely on their parents to do their taxes for them -- no joke! 

To all the guys out there, if there's one way you can turn a girl off (aside from being unemployed or lacking personal hygiene), it's telling her that your parents do your taxes for you. If you're even reading this blog -- guys or girls -- I assume that you've decided to take some stock in your financial life, which means doing things, such as taxes and the like, yourself and not relying on Mommy and Daddy. (Contrary to popular belief, 21+ should never be the new 16.) 

With that out of the way (phew!), do not, I repeat, do NOT use a Form 1040EZ when filing your taxes because doing so prohibits you from taking advantage of the super-tax-payer-saving ways I'll mention in a second. Instead, use the standard 1040 form. I assume that it's a trade-off as to whether you want to fill out a no-muss-no-fuss form (the 1040EZ), or whether you want to get into the more nitty-gritty and wring some cash from your filing form (the standard 1040). Since the EZ is just so......easy.....most tend to file using the former, which is fine if you know you don't qualify for deductions. 

Here are some clutch ways to save yourself some greenbacks when filling out your 1040:
  • If you're making less than you thought you would after graduation, don't fret! You're automatically eligible for a saver's credit, as long as you're lining any retirement plan you've chosen (401(k), IRA, etc.) with monthly contributions. The catch is you have to make less than $26,000 per year (not horrible, considering the cost of living differs from region to region), but you can save an upward of $1,000 in money that might have otherwise gone to paying taxes. Consider it the government's reward for savers who are thinking ahead.
  • Did you know that your moving expenses (renting a U-Haul, gas for the trip, buying packing boxes, etc.) can be tax-deductible if your job out of college is 50+ miles away from your old address?
  • The idea of paying off those student loans could give anyone an ulcer, but remember this: you can now claim up to $2,500 of interest on student loans in the form of tax deductions, even if you're parents are paying off your loan interest. Apparently, the government deems any payments from a parent toward their kids' student loan a "gift," which is great news for both parties!
Just remember, you can't garner these savings unless you 1.) file your taxes , and 2.) use the standard form 1040. 

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