Stepping into adulthood brings a lot of new responsibilities—rent, groceries, insurance, and yes, taxes. Whether you're starting your first job, freelancing, or still in school and earning a little on the side, understanding how taxes work can save you money and stress. Here are some simple but important tax tips every young adult should know.
Even if you're not earning a full-time income yet, you might still need to file a tax return. If you made at least $14,600 in 2024 as a single filer, you’re required to file. But even if you earned less, it might still be worth it. You could be eligible for a refund if federal taxes were withheld from your paycheck. You can check the official IRS filing requirements to be sure.
W-2s, 1099s, and W-4s can be confusing at first. Here's a quick breakdown:
W-2: If you’re an employee, you’ll get this from your employer. It shows your total income and how much tax was taken out.
1099: If you freelance or work part-time gigs, you may get this form instead. Taxes usually aren’t withheld, so you may owe when you file.
W-4: This form is filled out when you start a job. It tells your employer how much federal income tax to withhold from your paycheck. You can always update it if your situation changes.
Credits can reduce the amount of tax you owe, sometimes even leading to a refund. Common ones for young adults include:
The American Opportunity Credit and Lifetime Learning Credit if you're still in school or paying off tuition.
The Earned Income Tax Credit (EITC) if you’re a low- to moderate-income earner.
Learn more about these and other tax credits directly on the IRS website.
If you’re paying off student loans, you may be able to deduct up to $2,500 in interest paid during the year. You don’t need to itemize your deductions to claim this one, which is a plus for most young taxpayers.
Many young adults are earning extra money through online gigs, rideshare apps, or freelance projects. If that’s you, be aware that income isn’t always taxed upfront. You might owe self-employment tax in addition to regular income tax.
Keeping good records of income and business-related expenses can make tax time easier and help reduce your taxable income.
Whether it’s physical receipts or digital invoices, stay on top of your documents. Having organized records helps you file quickly and accurately, and makes it easier to respond if the IRS asks for clarification.
Understanding your taxes now can help you avoid costly mistakes later. Whether you're earning your first paycheck, freelancing, or paying off student loans, learning the basics puts you in control. And if you’re ever unsure, don’t be afraid to ask for help.
The Taxpayer Advocate Service is a free resource for resolving issues with the IRS. Or, if you want personalized guidance and peace of mind, reach out to Powell Tax Law for a pressure-free conversation. We’re here to help you feel confident and taken care of.