Tax Ideas for the End of Year Students Aren’t Told About

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Most people are worried about how tax season is going to go, they may either end up with a nice surplus of cash or have to pay their state and the IRS a fee. Young people, especially, do not seem to understand that there are ways to protect your money so you are not being taxed to the extreme. Below we’ll examine some opportunities.

Contribute money to a tax-advantaged savings plan: Usually this includes a 401(k) and an IRA, my preference is the Roth IRA. You are able to contribute up to $17,500 at the time of this writing into a 401(k) account. This figures seem to increase over time, so when you’re older the amount you can contribute may grow. For an IRA you can contribute up to $5,500 as of this writing. What this does is takes either $17,500 or $5,500 off the table from taxation for that tax year. These functions act as tax deferrals, as there are taxation rules upon taking the money out of these accounts.

I hold a Roth IRA with Fidelity.

Contribute to Charity: Charitable donation tax rules depend on the charity you are donating to. If they hold 501c(3) status or another 501c status from the IRS and their state this means that donations are tax exempt. In some instances charities can even give tax exemptions on donations retroactively.

As an example I am starting up my own Non-Profit Organization and will be seeking donations in the future. Once FAAET’s status is secured donations will be tax exempt, with conditions regarding retroactive donations.

Give Money Away: You can give up to $14,000 a year in gifts to as many people as you’d like via cash, stocks, bonds and real estate. Giving the money away lessens the tax load on you. It is also a good idea here to have your parents do this via a 529 plan account for your future college education.

Watch Congress: Finally, it is important to watch what Congress does year in and year out. Each year they seem to have different tax breaks you can take advantage of. I remember for a number of years in a row you could use purchasing new windows as a tax break of some sort. These situations can change year to year, so it is important to see what is out there and tax advantage of it. For example, if their is tax relief when purchasing a new car it might be worth it for the tax break.

In conclusion there are some ways to save yourself as a student from being taxed to the extreme and a number of them are fairly secretive by Congress, but others just require being told they are available and we hope we’ve touched on a few things here to help.

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