Financially, the time after graduation can be difficult. Starting on your own, looking for a job, trying to pay back money that you may have borrowed for school can all be very stressful when it comes to budget management. Fortunately, recent college graduates can claim a few tax breaks to save.
Three Tax Breaks:
Student Loan Interest Deduction: Borrowers earning less than $60,000 a year can receive a full deduction from the interest paid on the loan. Those in the interest range of $60,000 to $70,000 are entitled to a partial deduction. A borrower earning $55,000 a year with loans over $2,500 can save $625 at the time of taxation.
Lifetime Learning Credit: Taxpayers can receive a $2,000 annual credit for all qualifying expenses in their own or post-secondary education of their dependent. The credit is not reimbursable, but it matches the dollar’s expenditure. Lifetime learning credit reduces expenses of $2,000 or less to zero. Students who graduated in May can claim a portion of their tax return expenses. For those students in the first four years of post-secondary education, the American Opportunity Tax Credit is also available, offering $2,500 in credit.
Other opportunities: Graduates are eligible for a variety of tax credits and breaks that the young professional often overlooks. For example, your tax bill can be helped by 401 (k) retirement plans that allow pre-tax contributions, or a Roth IRA that taxes contributions but does not withdraw. Saving is another option that many graduates must earn a tax credit. Those who earn less than $18,000 per year are eligible for a tax credit of 50 percent of their savings of up to $2,000.
All it takes is a little bit of research and you can find a variety of tax credits and deductions to keep your money in your pocket. Every little bit helps, especially when you’re out of school.