This deduction is an above-the-line exclusion from income, meaning that you can claim it even if you claim the standard deduction.Īlso, note that there are earnings limits. The amount of the student loan interest deduction is based on the amount you paid in interest on federal and private student loans during the previous calendar year. You currently are or were enrolled at least half time If you fall into this category, you may be able to deduct up to $2,500 from your taxable income as long as you meet eligibility requirements, including the following: Understand Student Loan Interest DeductionsĪpproximately 70% of students in America take out some type of student loan to fund their education. The deadline for filing a 2022 Individual Federal Income Tax return is April 18, 2023. That’s why you always need to know the tax-filing deadline and make sure you’re on time - ideally being a little early to give yourself some wiggle room. This penalty kicks in the day after the tax deadline ends. According to Bill Smith, managing director of CBIZ MHM’s National Tax Office, the failure-to-file penalty costs 5% of your unpaid taxes for each month your tax return is late and goes up to as much as 25%. Failing to do so on time can result in some ugly consequences. The IRS has strict deadlines about when taxes must be reported each year. However, if you’re classified as an independent contractor, you’re responsible for reporting taxes yourself and sending in either quarterly estimated tax payments or an annual tax payment.įor a detailed overview on the differences between an employee and independent contractor, check out this guide from Berkeley Law. If you’re classified as an employee, your employer will automatically withhold your money and send it to the IRS, and you’re all set. “For the independent contractor, the company does not withhold taxes.” “For the employee, the company withholds income tax, Social Security, and Medicare from wages paid,” explains the U.S. Tax reporting is handled differently depending on your classification, so it’s important to have a firm understanding of how each arrangement works. Many take on freelance jobs during the initial stages of their career and may not work for an employer in the conventional sense. However, it’s increasingly common for college students and recent graduates to work as independent contractors. The majority of the workforce is classified as an employee - roughly nine in 10 workers, according to recent data. Know Whether You’re an Employee or Independent Contractor
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