You have just graduated from college and have your first full-time job. You are actually making money. But, you are also paying taxes. As a recent graduate, you can reduce the amount of taxes you have to pay on your first real wages with these tax hints.
• If you have been in college part of the year in which you are filing taxes, you can use the Lifetime Earning Credit. This credit allows you to reduce your tax bill by the amount you have paid on qualified expenses on your education. If those educational expenses add up to $1,000 and you owe $1,000 in taxes, now you owe zero! However, you can’t get a refund with this credit. If you only owe $800 in taxes with $1,000 of expenses, the IRS is not going to give you $200. To use this credit your adjusted gross income (AGI) must be no higher than $63,000.
• If you are in college or have just graduated, you can use the American Opportunity Tax credit. This is a $2,500 credit available for the first four years of a post-secondary education.
• If you are repaying student loans, federal and/or private, your taxable income can be reduced by up to $2,500 with the Student Loan Interest Deduction. If your AGI is less than $60,000, you can take the full $2,500 deduction. If your AGI is between $60,000 and $75,000, you can take a reduced deduction.
You’re a new wage earner. Take advantage of tax breaks offered to college graduates!