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Top 5 Tax Planning Tips for Recent College Grads

August 19th, 2014 by Rebecca Lake

college graduate tax tipsGraduating from college feels a little like crossing the finish line of a very long race but in reality, it’s just the beginning. Going from the classroom the working world is a major transition that brings new responsibilities, including obligations to Uncle Sam. If you’re just starting out in your first job, seeing how much of your money goes to taxes each payday can be a real shocker. To help you hang on to more of your cash, take a look at these helpful tax tips for new grads.

1. Claiming Your Exemption

While you’re still in school, there’s a good chance that your parents claimed you as an exemption on their taxes to score tax break. For 2014, each exemption you claim reduces your taxable income by $3,950. One of the most important things you need to figure out is whether you’re able to claim a personal exemption for your own benefit.

The IRS guidelines on exemptions are pretty clear-cut for students. If you’re under 24 at the end of the year, you were a full-time student for at least five months of the year and your parents provided more than half your support they’re entitled to claim your exemption. If you’re under 24 and provide most of your own support or older than 24, then congratulations, you can take the exemption for yourself. Read more »

taxpayer bill of rightsThe federal tax code is complex and if you’re not a financial professional, trying to make sense of it is often an exercise in frustration. When you have a tax question or issue that needs to be resolved, calling up the IRS for help can lead to more confusion. Part of the problem is that consumers often don’t realize they’re entitled to certain protections under the tax code.

In an effort to improve the resolution process, the IRS recently unveiled its Taxpayer Bill of Rights, which summarizes several key provisions of the tax law. The agency plans to provide the millions of Americans who receive a tax notice this year with a detailed description of their rights. If you’re facing an audit or attempting to negotiate the payment of a tax debt, here’s what the IRS wants you to keep in mind. Read more »

premium-tax-creditUnless you’re totally out of the loop, you know that the Affordable Care Act now requires Americans to have health insurance or risk facing a tax penalty. To cut down on the number of uninsured, the federal government opened the Healthcare Marketplace in October 2013 to make finding affordable coverage easier.

A new Premium Tax Credit was also introduced to help offset some of the cost. While it may relieve some of the financial burden associated with buying insurance, taxpayers could end up paying the price when it’s time to file. If you signed up for healthcare coverage through the federal marketplace, here’s what you need to know about the advance credit. Read more »

using ira for collegeEarning a college degree is practically a must these days if you want to get ahead in the workforce but the cost can be a significant obstacle for many students. According to CollegeBoard, the average cost of a tuition at a public four-year university was $22,203 for the 2013-14 school year. Students who attend a school pay even more, averaging $30,094. Those figures don’t include the cost of room and board or books.

Parents who are looking for ways to save ahead for college expenses have several options to choose from, including 529 plans and Coverdell Savings Accounts. Read more »

volunteering IRS tax deductionsSummer is a great time to get out and do some good in your community, or around the world if you’re feeling a bit more adventurous. While the satisfaction of helping others is the best reward for volunteering, you may also reap some financial benefits in the form of a tax deduction. While the IRS doesn’t allow you to deduct the value of your time or services, there are certain volunteer expenses that may qualify for a write-off. If you’re planning to do some hands-on giving this summer, here’s what you need to know to be prepared at tax time. Read more »

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