Tax Tps for Gen Y
July 10, 2012
With so many things going on in our
lives at once, why should a person waste valuable time on something as boring
and depressing as taxes. Especially for young people, Millennials, taxes are an
afterthought. An annoyance dealt with once a year and forgotten. BTW, there's
really nothing a young, single, independent professional can do to reduce their
taxes anyways? Right? Wrong. Although many of the income tax deductions you see
your parents take (children, mortgage, etc.) do not apply to you, there are
some great savings in the tax code for us if you know where to look. Here are
the top five.
Student Loan Interest Deduction
At the end of the year your student
loan provider, whether its Sallie Mae or a private lender, will send you a form
showing how much interest was paid on the student loan you took out to
finance college: the best six years of your life. That interest is a 100%
adjustment to your income which means if you paid $3,000 in student loan interest
this year, then your income is reduced by $3,000 when Uncle Sam calculates how
much you owe him at the end of the year. If you make over $50,000 that student
loan interest deduction will become less than 100% and is completely phased out
when you make over $70,000 modified AGI.
Moving Expenses
Gen Y is the most mobile generation
in the history of mankind. That's great for tax purposes as well as for life
experience. If you move more than 50 miles for a job, then the expenses
incurred for that move are an adjustment to income just like the student loan
interest deduction. Expenses like airfare, storing and moving your stuff, hotel
rental on the way to your new home, boarding and shipping your dog, among many
others are deductible. There are rules regarding the length of time you must
spend at your new job to qualify for this deduction so make sure your move is
for a long term gig.
Educator Expenses
Gen Y truly believes in making a
difference with their professional endeavors. That's why so many of us are
becoming teachers. But you ask any teacher, especially teachers in urban school
districts, and you will get an earful about the expenses they pay out of their
own pockets just to keep their classrooms running. Uncle Sam heard you and is
giving you a break. Out of pocket expenses on things such as supplies,
materials, books, software, etc. up to $250 can be taken as an adjustment to
income.
Deduction for Higher Education
Expenses
Gen Y is the most highly educated
generation ever. We know it pays off in the long run to get an education. It
also pays off in the short run when you calculate your taxes. You can take a
deduction of up to $4,000 for tuition and mandatory fees paid to a qualified
degree or certificate granting institution of higher education beyond the high
school level. If your income is over $65,000, your max deduction
is $2,000. This deduction is phased out for MAGI over $80,000.
Alternative Motor Vehicle Credit
If you bought a new hybrid,
electric, diesel, or other kind of clean vehicle after January 1, 2006, then
Mother Nature and Uncle Sam want to give you a reward. You can claim a tax
credit of between $400 to $4,000 against your tax liability, depending on the
fuel economy and the model of your new clean vehicle. Your car dealer will give
you the tax deduction information at the time of purchase. If you would rather
spend as little time talking to a car dealer as possible, ask your local
independent tax preparer for help with this and other tax saving
deductions.
Posted by Jerry Chin. Posted In : 2012 Tax Tips