Navigating taxes might seem daunting, but understanding how to find every dollar you deserve during life’s major transitions can make a huge difference. Whether you’re wrapping up your degree, starting your first job, or figuring out tax filing basics, these tips are designed to help you maximize your savings and keep more money in your pocket.
Here are 12 tax tips, specially geared towards Gen Z, to help you start saving early through these major life events:
Education
- Take advantage of the American Opportunity Tax Credit (AOTC). The AOTC offers a tax credit for education expenses for the first four years of college by either your parents or you (if you are not claimed as a dependent by your parents).
- You can take advantage of the Lifetime Learning Credit (LLC) if you pay for courses to improve your job skills, as well as for additional courses, even if not used to get another degree. That means costs for coding boot camps or certification courses relevant to your work might be deductible. It’s like getting paid to learn!
- If you’re paying interest on student loans, you might be eligible to deduct up to $2,500 and directly reduce your taxable income (less taxable income means lower taxes generally). The amount you can deduct will depend on your overall income and filing status.
Entering the Workforce
- Small, consistent contributions to retirement plans can leverage compound interest and grow your savings over time. Starting early means your money has more time to grow.
- Your job might offer perks like tuition assistance, health savings accounts, and mass transit benefits that can save you money and reduce your taxable income. Make sure you’re taking full advantage of these options!
- Adjusting your withholdings can mean more take-home pay throughout the year instead of waiting for a big tax refund. This gives you more financial flexibility right now. You can ensure you have enough withheld to meet your tax needs and free up cash with each paycheck with our W-4 Calculator.
Basics of Investing
- Start with retirement accounts like 401(k)s or IRAs. Learn about tax advantages, such as Roth IRAs, which grow tax-free.
- Learn about index funds, a smart way to start investing with low fees and diversification to reduce risk.
Maximizing Your Side Gig(s)
- Keep detailed records of all earnings and costs. You can deduct many of your expenses, including those related to the space in your home that you use exclusively for your side hustle.
- If you’re making significant income from side gigs, you may need to pay estimated taxes quarterly to avoid penalties. This ensures you pay taxes as you earn your income.
Filing 101
- Understanding different filing statuses can help determine which one saves you the most money. The right status can maximize your deductions and credits.
- If you have kids, you can claim the Child Tax Credit, up to $2,000 for each dependent child under 17.
Common mistakes to avoid when filing:
- Missing deadlines: File on time to avoid penalties. If you can’t file on time, extend your return but pay any tax due by the original due date to avoid any late payment penalties or interest.
- Incorrect information: Double-check your details to avoid errors that could delay your refund or lead to audits.
- Overlooking deductions and credits: To get the most money back, make sure you claim all eligible deductions and credits.
No matter what moves you made last year, TurboTax will make them count on your taxes. Whether you want to do your taxes yourself or have a TurboTax expert file for you, we’ll make sure you get every dollar you deserve and your biggest possible refund – guaranteed.
