Millennials are busier than ever and it’s no different during tax time. We tend to rush through the process in order to get a refund, or find out if we owe the IRS money. However, that leaves a lot of room for errors and important tax savings that are missed. Here are seven simple tax tips for millennials that will help reduce your tax bill.
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This may seem like an easy tax tip but it’s an extremely important one. Every year the exact tax filing date fall on a different day. Sometimes it’s due to observed holidays or the date falling on a weekend. In general, corporations and businesses must file their taxes by March 15th and individuals must file their taxes by April 15th.
However, the exact dates will be listed on the IRS website every year. For example, in 2017 your individual income tax return is due by April 18th, giving you a few extra days to file. If you do not file your taxes by the tax filing deadline your account will be subject to late payment fees and interest charges.
Technology is your friend when it comes to tax tips and free filing options. With tax filing mobile apps you’re only a touch away from an expert tax professional to help guide you through the process.
The IRS works with these recommended e-filers to offer free electronic filing to individuals and families who earn less than $62,000 per year. Thanks to technology you can accurately file your taxes for free and save a good amount of money.
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If you enrolled in any sort of higher education, or continuing education classes, the expenses you incurred out of pocket are tax deductible. This includes money spent on boarding, supplies, books and course materials. In addition, if you’re paying down a student loan the interest paid on this throughout the year can also be claimed as a tax deduction.
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Start saving for retirement today! Seriously, do it right now. It’s never too late to start, even with just $10 - $25 per month. The best individual retirement vehicle is the Roth IRA. You have complete control over your account and the interest earned throughout the lifetime of your Roth is completely tax-free. You can also withdraw the funds without paying a penalty to use for a down payment on your first home, higher education and more.
In addition, if your employer offers a 401K start investing a portion of your paycheck. This is an especially important opportunity if your employer offers a 401K match. It’s like getting free money to invest in your own retirement because your employer will also match the amount you save. It’s a win-win.
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By starting to save money for retirement now you could qualify to claim the Saver’s Credit. This is an often overlooked credit but could save you as much as $2,000 off your tax bill. Whether you’re stashing money in a Roth IRA or 401K (or both) you could be eligible to claim the Saver’s Credit. This is another great reason to start saving for retirement today!
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As a Millennial you likely have several income streams in various forms of side hustles. Maybe you work as a freelancer or sell crafted items online. The good news is that any expenses associated with these side income ventures is tax deductible and can be applied against any income you made. If you use your home office exclusively for work-related purposes, you may be able to claim the home office tax deduction as well.
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If you spent any time looking for a new job this past year and incurred job-related expenses, these can be deducted on your tax return. Some items you can deduct while looking for a new job include costs for resume copies, dry cleaning, travel expenses, agency fees and more. This tax deduction also applies if you had moving expenses for a new job, or had unreimbursed expenses from your employer.
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As a Millennial it’s important to claim all of the tax deduction that you qualify for, so you can reduce your tax bill. Use these tips to get ahead financially and ensure your tax bill is as low as possible.