<p>Hello Parents!
Just looking for advice, but I am fresh college grad who has started working. I am single, no dependents, and I don’t own any big assets (IE. house, rental property, etc.). I have been checking my income recently and my after tax income is significantly low. Any parents have advice on what to do to offset the taxes? I do still have student loans but the interest accumulated so far that I can show in taxes is pretty insignificant (plus I am going to pay them off shortly). Any insight would help.
Thanks!</p>
<p>Does your employer offer a 401k? And if so, do they provide a match? </p>
<p>You can possibly lower your taxes by setting aside the money pre-tax. The current max is $17,500/year. Even a little bit up to the match (if one exists) may help. </p>
<p>Dh has always set aside the max in his 401k each year. There were many years when we could’ve used the money, but it was easy to ignore. And it provides a way to reduce taxable income.</p>
<p>Do you participate in an employer 401k plan? If so, that’s pre-tax. If not, you can contribute to an IRA or RothIRA and save on taxes that way. How many exemptions are you taking? Most singles can take 1 or 2 and still come out okay, but after you do your taxes this year, see if you have a large return or owe a little. If large return, you can probably take an extra exemption and have more money throughout the year.</p>
<p>You might want to schedule some time with a financial planner to see if you can save some money and the best way to do it.</p>
<p>Your taxes will be based on your taxable income which is basically your adjusted gross income less your standard deduction and your personal exemption (assuming your parents can’t claim you as a dependent). </p>
<p>The interest on your student loans is deducted before your AGI. You have to have actually paid the interest in the tax year in order to deduct it (i.e if it was accumulating and being added to the loan, it is not deductible). </p>
<p>The only way you can reduce your taxes is if you have expenses you can use as itemized deductions that total more than your standard deduction. The standard deduction for 2013 for a single person is $6100. You would have to have deductible expenses (mortgage interest, medical expenses in excess of 10% of your AGI, real estate taxes etc etc) that exceed $6100 in order for it to be beneficial to itemize rather than take the standard deduction…</p>
<p>Yep, New grad S2 neglected to sign up for the 401K at his work this year. We kept telling him to do it but he didn’t . Came over to get help with his taxes yesterday(never done them before…dh always did them for him). Since he is a young single male with no deductions, his taxes were a whopping 25% of his total take home pay! He’s going to owe $90 for state and get $1800 Fed, refund. He will def. get going on the 401K this year after seeing how heavily he was taxed last year.</p>
<p>Not to mention that if S2’s employer matches 401k contributions, he’s missing out on a raise. My employer matches up to 10%, which means I’m making 10% more than my base. Free money, plus tax savings.</p>
<p>Your son should contribute to an IRA for 2013. He can do that up till 4/15 and it still counts for 2013 tax year.</p>
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<p>Contributions to a Roth IRA are not tax deductible, and therefore will not decrease taxable income and will not lead to lower taxes currently. The benefit of a Roth comes at retirement when basis (contributions) and earnings are distributed tax-free.</p>
<p>Also, depending on income, you can contribute to a Roth even if you contribute to a 401-K. Should consider doing so while you still can.</p>