A Tax Fact from The Tax Institute at H&R Block

Did you know student loans can actually lower your tax bill? Now that you are out of school and working, it’s time to think about how to get the most from your pay.

One number says it all
And that number is how many withholding allowances you claim on your W-4 form that you filled out for your employer. The W-4 determines the amount of your tax refund—or how much you will owe the IRS—every year. If you would like to see how changing your W-4 could change your paycheck and your taxes, try the H&R Block Withholding Calculator located on hrblock.com.

Thinking about a second job?
If you take a second job, your paycheck tax withholding probably needs updating. People who work two jobs often don’t withhold enough from their part-time earnings, and wind up owing money at tax time. The solution is simple: fill out a new W-4 to increase the amount of money withheld from your primary paycheck.

Student loans: the good news!
Here it is: For 2008, if you are single and your modified adjusted gross income (MAGI) is less than $70,000 a year, or if you are married and that number is less than $145,000 a year, you can deduct at least some of your student loan interest. For 2008, you may deduct up to $2,500 in interest.

Let’s talk about retirement
Believe it or not, now is the best time to start saving for your retirement. Thanks to the time value of money, if you invest an amount annually for 10 years from age 20 to 30, then stop—and just let your money grow until age 60—you will have almost as much in your retirement account as someone who invests the same annual amount for 27 years from age 33 to 60! Imagine the benefit of continuing to save from age 20 all the way to age 60 or later!

You can be one of the smart future retirees by signing up now for your company’s 401(k) or whatever retirement plan your employer offers. Many companies will match your 401(k) contributions up to a certain amount based on how much you contribute. Plus your retirement contributions are deducted automatically from your paychecks so you will never even miss the money.

This Tax Fact is brought to you by The Tax Institute at H&R Block.
To view other helpful tax information or listen to our Tax Fact podcasts, visit www.digits.hrblock.com

As always . . . everyone’s tax situation is different, so be sure to consult a tax professional or financial advisor before making important financial decisions.

This Tax Fact is for educational purposes only and is not intended to be a substitute for seeking personalized, professional advice, nor is it intended to be used to avoid IRS penalties.