Federal Income Tax Tips for the Class of 2002
Posted by accountingweb on 156
Students graduating this year will find the tax laws ease some of their post-graduation expenses. Here is a run-down published by CNNMoney  of laws likely to affect the class of 2002:
- Student loans. You can get a higher starting salary and still qualify to write off up to $2,500 in interest paid on college loans this year. Beginning in 2002, a new law extends the deduction to single individuals with adjusted gross incomes between $50,000 and $65,000 and married couples with $100,000 to $130,000 on joint returns. This deduction can be claimed regardless of whether you itemize deductions. But keep in mind you can deduct the interest only if the loan was used strictly for college expenses, is in your name and you can't be claimed as a dependent on your parents' return.
- Moving expenses. Save your receipts if your new employer doesn't reimburse all your relocation expenses. Some of the costs may be eligible for the moving deduction. As with the student loan deduction, the moving deduction can be claimed regardless of whether you itemize deductions. But keep in mind only a few basic moving expenses qualify for the deduction. These include the cost of shipping your personal possessions, transportation to your new location and lodging en route.
- Withholding. When you start your new job, you may be stunned by the amount of tax taken out of your paycheck. Because of the way the withholding tables are designed, new grads who start jobs in the middle of the year can end up having far more tax taken out of their paychecks than their salary levels would normally dictate. This is because the tax tables assume that whatever amount you're being paid each week is a salary you'll earn all year long. If, like most June grads, you'll earn your salary for only about half the tax year, you can find yourself in a higher tax bracket for purposes of withholding this year than you'll actually be taxed at next tax season. There are several ways to cope: You can wait for a big refund in 2003. You can adjust the withholdings on your Form W-4. Or you can ask your employer to use the "part year" method.
Good luck to all.