Doing your taxes is already a pretty arcane process, and that’s before you factor in deductions, exemptions, write-offs, and more. What even is a deduction, anyway? I don’t know. But the highly skilled Certified Public Accountants behind new tax app Taxfyle, the world’s first on-demand CPA marketplace, do. Here are five tax deductions that younger people in particular may be missing.*
But first, a quick lesson: A tax deduction is anything that reduces your total taxable income. Everyone is eligible to claim a standard deduction (for singles, it’s $6,300 for 2015, aka the tax year everyone’s about to pay) or to itemize — but the latter is only worth doing if your itemized deductions add up to more than $6,300, which for young people they probably won’t.
Thanks to CPAs Victor Aldin and Steve de la Fe — both of whom are signed up and ready to help you out on Taxfyle — for providing the following expert info.
Moving Expenses for Your First Job
If your first job is at least 50 miles from your old home, you can deduct the cost of travel and moving your stuff to your new spot. There’s a lot of expenses you can claim on this, and Victor says he’s “never seen a maximum” dollar amount. If you drive, you can deduct 23 cents a mile, other transportation expenses (i.e. parking and tolls), hotel nights, and moving-company fees. The only catch is, if your new company reimburses you for any of the above, you can’t claim it.
Health Savings Account
If you deposit money directly from your paycheck into a Health Savings Account, or HSA (which you can use as a pre-tax way to pay for medical expenses), you can deduct that full amount from your 1040 tax form at the end of the year. It doesn’t matter if you spend all of the money, either — but keep in mind that if you spend the money on anything other than health care, you’ll have to pay a penalty.
Simplified Employee Pension (SEP) Plan or Traditional IRA
It’s never too early to start thinking about retirement, even if you’re relatively fresh out of college and freelancing or working for yourself. An SEP is a pension plan for self-employed people, and whatever pre-tax money you put into it over the course of the year (up to the max allowable amount of 20% net employment earnings, or $52K, whichever comes first) is 100% deductible. Or, if you contribute to a traditional IRA (not Roth, as that’s post-tax), you can deduct contributions of up to $5,500 per year.
American Opportunity Credit/Lifetime Learning Credit
These two credits actually reduce your tax bill, rather than your adjusted gross income. Both can slash up to $2,500 from what you owe. The former can be claimed by people getting undergraduate degrees, and the latter to anyone who’s enrolled in higher education. And that one doesn’t have to be degree-seeking, either: Technical schools and continuing education counts.
Student Loan Interest
If you’re paying down a student loan, keep an eye out for form 1098-E, which is mailed to you from your loan provider if you paid $600 or more in interest over the previous year. If you’re single and you make no more than $80K/year, you can deduct a maximum of $2,500 in student-loan interest from your taxable income. Keep in mind that if you paid less than $600 in interest, you won’t receive form 1098-E — but you can still claim the interest. Just call your loan provider to find out how much you paid.
These are only the big deductions you might be missing. If you want to learn (and save!) more, download the Taxfyle app, which provides you with access to the very best CPA talent who will work on your taxes 24/7 — and for cheaper.
All it takes are three easy steps:
- Download the Taxfyle app.
- Answer 10 yes or no questions and upload your W-2 or 1099 (if you have it; if not, you can skip this step).
- Get an instant quote. If your assigned CPA needs any more info they will send you an in-app encrypted message.
That’s it! The process is super easy — and, if you refer a friend, you’ll get $10 off your return, and $5 off theirs. No need to stress any more about doing your taxes *or* missing deductions that could save you $$$.
Hunter Slaton is the Content Director for Studio@Gawker.
*Studio@Gawker is not providing readers with tax advice about their specific situation.