written by Mark Lamb
Millennials may believe they have insufficient income to need planning. But many have entered the corporate work force or are self-employed, and can benefit from tax and/or financial planning.
Here are some things to consider:
Expenses for Education
These are usually used as a tax credit. They can also be used in some circumstances as a business expense, which can be helpful for the self-employed. If you are a classroom teacher, you may be eligible to deduct $250 for class room supplies.
Interest paid on credit cards or vehicles is not deductible interest. It’s just money you are giving to the lender. Interest paid to purchase a home is deductible if you itemize. So, buying a house with a loan may make tax sense, but not financing a car or a vacation.
Manage Student Loan Interest
Although student loan interest can be deducted without itemizing, the deduction is limited to $2500. It also phases out to zero at certain levels of income.
Extra Considerations of Side Hustles
If you earn money from a side hustle, you may be subject to self-employment tax. However, you may also be able to deduct certain expenses associated with earning that money. Doing so reduces your taxable income -meaning you would owe less.
If the place where you work offers these benefits, be sure to participate.
Benefit Cafeteria Plans
Flexible spending plans (including healthcare and dependent care expenses) allow receiving income pre-tax – potentially avoiding income tax and FICA tax on contributions to those plans.
Although retirement may seem light years away, now is the time to start saving. A match from your employer is essentially free money. Another bonus is -your contribution lowers your income, so you’ II pay less tax.
Consider opening a Roth IRA. Making contributions to a Roth IRA account can be a way to accumulate significant tax-free wealth at the relatively minor cost of not getting a tax deduction today.
There are many things to consider with taxes and planning for your financial journey. If you would like to discuss these ideas, or other tax and financial recommendations, please contact one of our professionals at The Whitlock Company 417-881-0145.
More ideas and suggestions can be found here https://www.journalofaccountancy.com/issues/2017/sep/tax-planning-for-millennials.html