Tax season has begun and while the April deadline seems far away, there's no time to waste. Snagging a few tax breaks can boost your refund or lower your tax bill. But you could miss out on them if you wait until the last minute to file. If you're in your 20s, here are some key tax deductions and credits to watch out for.
Check out our federal income tax calculator.
1. Retirement Saver's Credit
The IRS offers the saver's credit to individuals who sock away money in a retirement account. Currently, the credit is good for up to $1,000 for single filers and $2,000 for married couples. To qualify for the credit, your income must fall below a certain threshold. For single filers, the most you could earn in 2015 was $30,500 if you wanted to claim the saver's credit.
So why should millennials try and cash in? When you're still in your 20s or your early 30s, you're probably not making a lot of money. If you're under the credit's income threshold, you can pad your retirement account and reduce your tax liability at the same time.
2. Earned Income Credit
Like the saver's credit, the Earned Income Credit is geared toward lower-income workers. That's why it's perfect for millennials who aren't bringing in big bucks. As long as you're at least 25, you have earned income within the IRS limits and no one can claim you as a dependent, you'll probably be able to snag the credit.
For the 2015 tax year, the maximum credit is worth $503 if you don't have kids. The value of the credit climbs to more than $6,200 if you have three or more children. So it can be helpful to millennials who have already started their own families.
Related Article: All About Tax Credits
3. Lifetime Learning Credit
If you're paying some or all of the cost of earning a degree out of pocket, you may be able to claim the Lifetime Learning Credit. The credit – which maxes out at $2,000 for the 2015 tax year – applies to qualified education expenses at colleges and universities that are eligible to participate in federal student aid programs.
Many millennials probably don't need to worry about the income cut-off when claiming the tax credit because the income limit is relatively high. For tax year 2015, single filers can qualify with a modified adjusted gross income of $64,000. The limit doubles for married couples filing a joint return.
If you've already started making payments on your student loans, you may be able to deduct some of the interest. Deductions reduce your taxable income for the year, which can drive down your tax bill. This deduction is good for up to $2,500 if you qualify based on your income and your filing status.
4. Moving Expense Deduction
If you moved in the last year because you switched employers, you may be able to write off some of the expenses on your taxes. The IRS lets you claim a deduction for moving expenses if you're starting a new job as long as it's more than 50 miles farther from your old home than your previous job location was. The kinds of things you can deduct include driving expenses, shipping and storage fees and the cost of hiring a moving van.
Related Article: How Tax Breaks Make College More Affordable
Good Recordkeeping Is a Must
If you're planning to claim deductions for moving expenses or student loan interest, keep in mind that you'll need the appropriate records to back them up. Hanging on to receipts, bank statements and credit card statements can keep you out of hot water if you're audited.
Photo credit: ©iStock.com/damircudic, ©iStock.com/sturti, ©iStock.com/Cathy Yeulet