- Days left

Money College: Maximize the student tax rebate

College is a cozy ideological cocoon, where inflation is measured by the quality of bar specials and where tomorrow never comes. Death and taxes may loom far outside the bubble, but debt (or at least significant costs) are part of the mix for almost everyone between 18 and 22.

There's always one guy who calculates the cost per hour of classroom instruction ($68.98 at Loyola University Chicago, in case you were wondering), while others cower and refuse to think of the debt they've accumulated. Tax season offers a further haven from reality. After all, there's nothing more gratifying than a fat, Technicolor check from the U.S. Treasury.

Of course, the best strategy for maximizing your refund is to not get one at all, calculating your proper deduction and avoiding that interest-free loan to Uncle Sam.
If you receive a refund this year, be proactive about putting it to good use--though let's assume that paying for your next couple of nights out does not count as "proactive." The following tips are my version of the good, the bad and the ugly when it comes to tax refunds: the fun, the functional, and the far-fetched.

The Fun
1) Use the 80-20 rule. Most of us learned to split our allowances 50-50 between two piggy banks. The recession and the sheer size of some refund checks will force you to ratchet it up a notch. Let the IRS work for you: tell them to deposit 80 percent of your refund into a savings account, the rest in checking where it's OK to spend it. Avoid my freshman mistake of depositing a refund into a checking account "for safekeeping." Let's just say that the bloated "freshman 15" can also refer to overdrawn account balances.

2) Thrifted essentials. If you've survived the semester with a collection of 10 shot glasses and two tumblers, now's the time to round out your collection. Head to the thrift store and reassure yourself that the matchy-matchy, put together look is so 2005. Thirty minutes in the dishwasher and your dated dishes will look as good as new.

The Functional

1) Pay down debt. How many of us will use the government's six month grace period on Stafford loans to avoid reality? Confront your obligations head-on and put all or some of your refund toward student loan or credit card debt. You won't be alone: 91 percent of respondents in a 2009 AP survey said they planned to use their refund to pay bills or repay debt. We can assume that most of these respondents began their post-graduate adventures long ago. Start thinking today about when your own will begin, free from obligation.

2) Build up an emergency fund. Relieve yourself of old debts or save for a rainy day? For college students, vehicle expenses, technological emergencies or last-minute travel plans are the most likely rainy-day culprits. An emergency fund can help graduates bridge the gap between classroom and career without moving back in with mom and dad. Above all, an emergency fund can help keep credit card debt low or nonexistent.

3) Invest in a working wardrobe.
Guilt-free shopping? Go ahead and spend your mini-windfall on clothes – but invest in timeless, work-worthy pieces that will endure a battery of interviews and internships. Guys, bring your girlfriend along and look for items with the following labels: "khaki," "chino," and, most importantly, "stain-resistant." Ladies, try shopping outlet malls or luxury stores' bargain-priced little brothers (think Nordstrom Rack and Old Navy).

As for the far-fetched ... I'll let your imagination run wild on this one. Do you have an overseas trip in mind that might change your life? Or an adventure of some sort your tax refund could support as opposed to, say, a keg party? Above all, remember: it's your money. Depending on how much you procrastinate, tax season and spring break can intersect at a dangerous angle. The trick is to get ahead of the April 15 deadline, get those tax returns filed, and plan what you'll do with a refund that makes the best use of your dough.

Increase your money and finance knowledge from home

Introduction to Retirement Funds

Target date funds help you maintain a long term portfolio.

View Course »

How much house can I afford

Home buying 101, evaluating one of your most important financial decisions.

View Course »

TurboTax Articles

Employer Sponsored Health Coverage Explained

The Affordable Care Act, also known as Obamacare, is simpler than some people may give it credit for. The basic rule to remember is that everyone must carry Minimum Essential Coverage (MEC) or pay a penalty. Employers with 50 full-time employees or more are obligated to sponsor plans for their workers to help them meet this requirement.

How to Report RSUs or Stock Grants on Your Tax Return

Restricted stock units (RSUs) and stock grants are often used by companies to reward their employees with an investment in the company rather than with cash. As the name implies, RSUs have rules as to when they can be sold. Stock grants often carry restrictions as well. How your stock grant is delivered to you, and whether or not it is vested, are the key factors when determining tax treatment.

What is a Schedule Q Form?

The Internal Revenue Service (IRS) has two very different forms that go by the name Schedule Q. One of them is for people who participate in certain real estate investments; this is known as a Form 1066 Schedule Q. The other Schedule Q deals with employer benefit plans. It?s not something an individual taxpayer would normally have to deal with, though a small business owner might need it.

Incentive Stock Options

Some employers use Incentive Stock Options (ISOs) as a way to attract and retain employees. While ISOs can offer a valuable opportunity to participate in your company's growth and profits, there are tax implications you should be aware of. We'll help you understand ISOs and fill you in on important timetables that affect your tax liability, so you can optimize the value of your ISOs.

Add a Comment

*0 / 3000 Character Maximum