Many are not aware of beneficial tax breaks that come with being a young adult. Filing taxes doesn’t have to be stressful but young adults can be caught up with finishing school, starting their career and entering the real world. To make it easy, here are a few tax breaks you shouldn't ignore if you are 18 to 35-years-old.
Earned income tax credit
The earned income tax credit is available to working Americans with a low-to-moderate income. For young adults just entering the workforce on a lower salary, this tax break could prove extremely helpful. The earned income tax credit is determined by income, as stated before, but it can also be determined by family size. While this tax credit was originally meant for families, recent changes mean some single filers can take advantage. Per the IRS, one-fifth of individuals still don't claim this tax break.
Saver's credit
The sooner you start saving for retirement, the better off you will be. If you start putting aside a small amount of income in your 20s, it will make a huge difference as you may have fewer responsibilities and time to map out a retirement plan. Just like the earned income tax credit, the saver's credit is a tax break for individuals with low-to-moderate incomes who are saving for retirement. For young adults who are starting out at an internship or other low-wage job, this tax break could be beneficial. The saver's tax credit could be worth as much as $1,000 for an individual and $2,000 for married couples filing jointly.
Charitable contribution deductions
Young adults have an affinity for social activism and charitable donations, so it's fitting you may consider deducting all charitable contributions for their taxes. During the pandemic, both the millennial and Gen Z generations gave more than any other generation. This tax break is perhaps one of the most common of the lot. It's important to remember to keep any receipts from donations, as this is the only way you can claim these deductions.
Lifetime learning credit
The lifetime learning credit is for college students who are at least part-time. In some circumstances, only one class can qualify an individual. It reduces tax bills on a dollar-for-dollar basis for a portion of the tuition and fees that a college student pays for themselves.
Moving expense deduction
Because those younger in age are more willing to travel or move for their job, consider checking out the moving expense deduction. The moving expense deduction covers individuals who have to relocate due to their job. The only requirements are that the new location must be a sufficient distance from the previous location and the mover must begin working as soon as possible. This deduction will even cover expenses like travel cost or the cost to rent a storage unit.
Whether you can use any of these tax breaks or not, it's always handy to be aware of your options if the need ever does arrive.
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