Those newly graduated from college and starting out into the wide wide world can take comfort in the fact that the tax code can help them out in the areas of paying off student loans as well as relocating to their new jobs. However, do not be surprised to learn that you cannot, however, deduct expenses you incurred while searching for a job.
Under the Taxpayer Relief Act of 1997, the first $2,000 of interest that is paid on a student loan is deductible. This deduction is available for the first 60 months that interest is required to be paid on a loan. Even more good news is that you do not need to be itemizing your deductions in order to be able to claim this deduction as is the case with most other types of deductions. This can be very helpful, as most college grads do not have enough deductible expenses to qualify for itemizing and therefore take the standard deduction.
However, before you can deduct the interest on your return, you must make sure that the loan is in your name and not your parents, and that you are the one who is liable for the loan. If your parents are the ones who took out the loan for you, the interest can be deducted on their return but not yours, even if you are the one paying off the loan. You must also be sure that you cannot be claimed on your parents' return as a dependent, otherwise you cannot take the deduction on your tax return. Finally, if your adjusted gross income exceeds $60,000 on a joint return or $40,000 on a single return, the deduction will start to phase out.
As for the relocation factor, if you are relocating to a different city in order to accept an employment offer, keep your receipts. Some of these costs may be deductible on your tax return, that is if your company is not reimbursing you fully for your moving expenses.
Costs that are eligible for the moving deduction are transportation to your new job location, the costs incurred for shipping your household goods and hotel costs you incurred en-route to your new home. Once again like the student loan interest deduction, this moving expense deduction can be claimed regardless of whether you itemize your deductions or take the standard deduction on your tax return.
One advantage the college grad does not have over others is being able to deduct job-hunting expenses on their tax return. Tax deductions for job-hunting expenses are available, but not for you. They are only available to those that are currently employed or have become recently unemployed. This can be a bummer for those of you college grads who spent an ample amount of money in your job search, however, this is the only downside to your newly found tax status. Rejoice in the other two deductions that are available to you!