Tax Breaks for Twenty-Somethings
by Susannah McQuitty
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Tax breaks: those are two seemingly contradictory words that you probably hear about every April, especially now that you’re in your twenties (does the terrible prospect of “adulting” come to mind for anyone else?). Taxes may be daunting, mysterious, and more easily handed off to your accountant than tackled in your sweatpants, but you know what? They don’t have to be.
As you move away from home, get a job, pay for school, and start saving for the future, there are tax breaks all along the way that can give you a major boost—and make adulting a little less scary.
Tax breaks for moving out
Your parents have been able to claim you as a dependent, meaning that they get a tax break for raising you and providing everything you need to get started in life. Now that you’re finally setting off on your own, you can start getting some of those benefits yourself, but you have to coordinate with your parents to make sure you’re all on the same page.
Changing your dependent status is easy: just make sure your parents don’t claim you as a dependent when they do their taxes. That’s it! Then when you file your taxes, you’ll get to claim an exemption for yourself, which means reducing your taxable income by a few thousand bucks.
Tax breaks for getting a job
Yeah, job hunting isn’t exactly the most enjoyable part of adult life, but it doesn’t have to be as bad as you may think. Believe it or not, you may be able to deduct job hunting expenses and moving expenses. Just bought a house? There are deductions that your mortgage interest may qualify for.
Then again, maybe finding the job isn’t the problem. You may already have one, but it doesn’t pay as well as you might like. There’s something for low-income taxpayers, too: the Earned Income Tax Credit applies to those who earn less than $14,820 if single and $20,330 if married filing jointly.
Tax breaks for paying off school debt
Student debt stinks. Thing is, you can make it stink less. Your loans may still take time to pay off, but you can get a deduction on your taxes so that you’re not treading in an ocean of owed money. Student loan interest can be deducted from your taxes, and you could even get the Lifetime Learning Credit if you go back to school or take classes related to your job.
Tax breaks for saving
It may seem like the last thing on your priority list, but saving for the years ahead is kind of a big deal—so much so that there are plenty of incentives to get you on the right track.
The Saver’s Credit is for low-to-moderate income workers (which applies to most entry-level positions) who contribute to retirement savings accounts like 401ks, IRAs, and Roth IRAs. Those savings accounts themselves have great tax benefits built in.
Now go out and get adulting
It’s a scary time of life, but getting started is never easy. Once you get some traction, though, you can start decoding the mysteries of becoming a true-blue adult (sign me up, too!). These tax breaks may not make you a millionaire overnight, but they can definitely give you a little extra boost as you start doing life.
That definitely makes this whole twenties thing a little easier.
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