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When it comes to navigating adulthood, there are several things you may not have learned in school. This is especially when it comes to finances — and taxes.
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Getting ready to file taxes for the first time and hoping to get a refund? GOBankingRates spoke with several financial experts to answer some of the most common tax-filing questions from Generation Z.
1. How much money do I need to make before I have to file taxes?
The answer depends on whether your parents still claim you as a dependent, said Varsha Subramanian, a CPA at AI-powered tax service FlyFin. If you’re not a dependent, you’ll need to file taxes if you earned more than the standard deduction for 2022 ($12,950 for single filers and $25,900 for joint filers).
2. Do I have to report scholarships or grants on my taxes?
Every situation is unique, said Brian Hershman, founder of BSH Accounting. However, in general, you don’t have to report school scholarships and grants on your taxes.
There are a few exceptions, though. According to the IRS, the amount you use on room and board, travel and optional equipment is taxable as income — as is money you receive for teaching, research or other services.
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3. How do I file taxes for freelance or side hustle income?
The money you make from freelancing or a side hustle counts as self-employment income, said Kathy Alfaro, tax strategist and owner of Alfa Tax Service. That means you’ll need to report the profit — your income minus business-related expenses — on Schedule C (Form 1040) when you file your taxes. It also means that money will be subject to a self-employment tax of 15.3% on top of regular income tax.
4. Do I still have to file taxes if I lived abroad last year?
If you earned more than the standard deduction while traveling or studying abroad, you’ll still need to report that money on your U.S. taxes, said Subramanian. This includes taxable scholarships and grants.
5. What should I do if I miss the tax-filing deadline?
This year, the deadline to file your taxes is April 18, but you can file for a six-month extension if needed. Without that extension (or if you miss the extension deadline), you’ll have to pay a fee.
“Generally, [the late fee is] 5% of the unpaid taxes for each month or part of the month that your return is late — up to a maximum of 25%,” said Subramanian. “And you have to pay interest on any unpaid taxes.”
6. What taxes do I need to pay on crypto or stock trading?
The taxes you pay on investments depend on whether you earned any short-term or long-term capital gains. According to Hershman, a short-term capital gain is what you earn from an investment you bought and sold within one year. A long-term capital gain is the profit from an investment you bought and held for over a year before selling.
“If there is a total gain of your stock trading in 2022 — you can get this on your 1099 form that your brokerage will issue you — you will owe long- or short-term capital gains on that income,” he said. “If you have an overall net capital loss for the year, you can deduct up to $3,000 of that loss against other kinds of income, including your salary and interest income.”
7. What tax deductions can I claim?
In general, you can deduct money you put into your pre-tax retirement accounts, including a 401(k) or traditional IRA. As an employee, you can also deduct money you spent on medical and dental benefits as well as group-term life insurance.
If you freelance or own a business, make sure to take advantage of self-employment deductions, recommended Hershman. Some common ones include:
Business use of cellphone
Business use of internet
Business mileage
Home office deduction
Business meals
Business credit card interest
Work-related travel and education expenses
Business insurance premiums
Office and work supplies
Legal, professional and advertising fees
Qualified business deduction
8. How can I make sure to get a tax refund?
Getting a refund from Uncle Sam is always more pleasant than finding out you owe more money. The best way to make sure you get a refund is to pay more than enough in taxes and take advantage of all deductions that apply to you.
“When you’re hired into a company, always complete the W-4 form as single, and don’t select any exemptions or manipulate any other data,” said Alfaro. “This will help ensure you are withholding enough money throughout the year to cover your tax liability when filing taxes.”
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This article originally appeared on GOBankingRates.com: 8 of Gen Z’s Most Common Tax Filing Questions Answered
