Graduating from College

Filing your taxes

So you're getting ready to file your first tax return as an independent person. First question: Who gets to claim an exemption for you (and shelter $3,400 of income from tax on your 2007 return)? You or your folks? The answer depends on the circumstances, not on the results of a family meeting.

Your parents get the exemption if you were under 24 at the end of '07, were a full-time student in at least five months of the year, lived at home more than half the year (living at college while you finished up can count as living in your parents' home) and did not provide more than half of your own support. If you're older or did provide more than half of your own support, for example, then you claim your own exemption. This is an either/or deal. If your folks qualify to claim you as a dependent, you can not claim your own exemption.

Student loan interest

As soon as you can claim your own exemption, you can also start deducting interest paid on your student loans. You can write off up to $2,500 a year in interest on those loans. Even if your parents pay interest on a loan for which you are liable, you may qualify to deduct that interest. But you can't use the 1040EZ form. To claim the student loan interest deduction, you'll have to use the regular 1040 form. There's a separate line for student loan interest and you can claim it whether or not you itemize your other deductions. The right to claim this deduction phases out at higher income levels, starting out at $55,000 for individuals and $110,000 for married couples filing jointly in 2007. The income phase-out for married couples will increase to $115,000 in 2008 but the limits for individuals will remain at 2007 levels.

Job hunting

While it can be costly printing your resume and traveling to interviews for your first job, you can't deduct those expenses. The cost of searching for subsequent jobs in the same line of work can be deductible.

Moving expenses

There's no prohibition against deducting the cost of moving to your first job. If you accept a job and have to move more than 50 miles from your current home for work reasons, you can deduct moving expenses that are not reimbursed by your new boss, including a mileage allowance for driving your own car (20 cents a mile in 2007, and probably slightly more for 2008 moves). You can claim the moving expense deduction whether or not you itemize deductions.

Updated for tax year 2007