Paying taxes is never fun, but it’s something you’ll have to do every year you work. If you’re a recent graduate, you might be navigating the confusing waters of tax preparation for the first time. Here are some tips and deductions you could qualify for when filing as a young professional.
Donations to nonprofits, including religious organizations, are usually tax deductible. Keep a record of all donations you make to a charity, no matter how small. Over the course of the year, the donations will add up to a healthy deduction. Note, however, that donations to political parties or political candidates are not deductible.
Mortgage Interest Payments
One of the best reasons to stop renting and buy a house is the tax benefits you gain when you are a homeowner. The entirety of your mortgage interest payments – usually at least a thousand, if not several thousand dollars every year – are tax deductible. For most homeowners, this deduction is one of the largest they have every year. If you are considering purchasing a home, this could help your tax situation in the calendar year the home is purchased and every year you carry a mortgage.
If you incur large medical bills, tax relief might help make these bills easier for you to swallow. If you have bills not covered by health insurance, they could be deductible – if they exceed 10 percent of your adjusted gross income.
Job Search Expenses
Many young professionals don’t realize that you can deduct the expenses associated with searching for a job or relocating for a new job, as long as it is more than 50 miles from your last job or your current home. With career changes common in the first five-to-10 years of professional employment, this tax deduction might get a workout early in your career.
Student Loan Interest
Don’t forget to report the interest paid – up to $2,500 – from all those student loan payments you’re faithfully making now that you’re graduated. And, even better is that this interest comes off your taxable income – not a deduction from your gross income, so you don’t have to itemize your taxes to cash in on this benefit. This is a good thing, considering many young professionals won’t have enough deductions to qualify for itemized deductions. Note, you can only claim this benefit on your taxes if you make less than $80,000 annually. But, for most young professionals out there, their first year’s salary will be much less than this threshold.
Taxes can be an overwhelming and intimidating subject, especially for new wage earners, but taking steps to educate yourself about your options and claim some easy-to-find deductions will put you in a much better position to understand and take advantage of any deductions available to you.
This article is for educational purposes only. Tulsa FCU makes no representations as to the accuracy, completeness, or specific suitability of any information presented. Information provided should not be relied on or interpreted as legal, tax or financial advice. Nor does the information directly relate to our products and/or services terms and conditions.