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If you’re a student or a recent grad, you are likely just starting your financial life and looking for ways to economize. One way to do that is to learn about the tax deductions and credits that can often help you lower your tax bill whether you’re still in school or just got your degree.

Here, you’ll learn about more than 20 possible ways you can save on your tax bill. But keep in mind: Taxes can get complicated. If you have any outstanding questions or concerns about your specific situation, consider consulting with a tax professional.

Smart Tax Deductions for Young Adults

1. American Opportunity Tax Credit

If someone is still in school, they might qualify for The American Opportunity Tax Credit (AOTC). The AOTC allows people to take a student tax credit of up to $2,500 for tuition, fees, and course materials they paid for during the taxable year for an undergraduate education.

In addition, 40% of the credit, or up to $1,000, is refundable, which means that someone can receive it even if they happen not to owe any taxes for the year. To qualify, the taxpayer or their dependent needs to be pursuing a degree and enrolled half-time at the very least. A taxpayer can only take advantage of this for four years, no matter how long it takes the student to finish the degree.

2. Lifetime Learning Credit

Unlike the AOTC, the Lifetime Learning Credit (LLC) is available to vocational, graduate, and non-degree or vocational students, too. The maximum benefit? Up to $2,000 is allowed per tax return. To learn more about the differences between the LLC and AOTC and which one might be right for you, see this IRS chart.

3. Student Loan Interest

Students and parents of students paying for a child’s education through student loans can use the student loan interest tax benefit for education. With this deduction, they can deduct up to $2,500 in interest they paid for the year.

4. Moving Expenses

Perhaps instead of going to college, a young adult enrolled in the military instead. If they are a Member of Active Forces on active duty and had to move due to a military order, then they could take a deduction for themselves, their spouse, and their dependents. On Form 3903, active members of the military can claim expenses related to a military move like transportation and storage of household goods and personal effects and travel (including lodging) from the old home to the new home. They cannot include the cost of meals.

The IRS has an interactive tool to help taxpayers determine whether or not their moving expenses may qualify for a moving deduction.

5. Self-Employment Tax

If a young adult chose to go into business for themselves after graduating, then they can deduct one-half of their self-employment tax, which is 12.4% for Social Security and 2.9% for Medicare. They can do this when figuring their adjusted gross income on Form 1040 or Form 1040-SR.

6. Home Office

Someone who works at home, whether they’re working at their job remotely or after hours, or they are self-employed, can take a deduction for their home office. Someone can deduct expenses that keep their home office running such as utilities, insurance, and general repairs, but they cannot deduct unrelated expenses like a gardening bill or the paint they used for a room that is not their office. There is a simplified method for this deduction as well as a regular one. With the simple one, taxpayers can deduct $5 per square foot of the home used for business, with a 300-square-foot maximum (see both methods on the IRS’ website ).

Recommended: Do You Qualify for Home Office Tax Deductions?

7. Standard Mileage Rate

If a young adult is using their car for business purposes, then they may be able to deduct their standard mileage rate, which is 67 cents per mile for tax year 2024. They need to keep in mind, however, that if they use the standard mileage rate, they cannot use the car expenses deduction as well. They cannot deduct lease payments, gasoline, car depreciation, vehicle registration fees, oil, or insurance.

8. Car Expenses

When a young adult does not use the standard mileage rate, then they can deduct car expenses that involve business purposes from their taxes. If they use the vehicle for personal and business expenses, then they need to split the deductions.

9. Meals While Traveling

When traveling for business, young adults who are entrepreneurs or self-employed can take a 50% deduction for their unreimbursed business meals. They can either take a standard meal allowance through the IRS or keep records of their actual costs for their meals and take those deductions.

10. Other Travel Expenses

The IRS also allows taxpayers to deduct some travel expenses. If young adults own their own business or are otherwise traveling for professional purposes, they could deduct things like travel by airplane, car, or train, fares for taxis to and from the airport to the hotel, the shipping of baggage, dry cleaning, and laundry, and business calls made on the trip.

11. Business Interest

If a young entrepreneur took out a business loan vs. a personal loan to get their startup running, then they can deduct the interest they paid. If they utilized the loan proceeds for more than one type of expense, then they need to allocate the interest based on how they used the loan’s proceeds.

12. 401(k) Contributions Deduction for Employed People

The government doesn’t tax money that an employee diverts directly from their paychecks into a traditional 401(k). For tax year 2024, the 401(k) contribution limit for individuals is $23,000; for tax year 2025, the limit is $23,500.

13. IRA Deduction for Self-Employed People

If someone does not have a job that provides a 401(k), they may be eligible to deduct their contributions to a traditional Individual Retirement Account (IRA). This can be a common tax deduction when you are self-employed.

You can learn more about the various kinds of IRAs and possible deductions from the IRS website.

14. Employee Pay

A young entrepreneur who has hired someone as an independent contractor may be able to deduct the income they pay that person on their tax return. You may want to check in with a tax professional if you hire contract workers or salaried individuals to make sure you stay on top of your taxes.

15. Educator Expenses

A young graduate who is working as a teacher is able to deduct up to $300 of the expenses they put towards things they used in the classroom, such as books, courses, and computer equipment. If they teach a course in physical education or health, then athletic supplies would count towards the deduction as well.

16. Health Savings Account

If a taxpayer chose to use a tax-deductible Health Savings Account (HSA) for their healthcare expenses in 2024, then they can contribute up to $4,150 for self-only coverage; in 2025, they can contribute up to $4,300. Note: An HSA is only available to people who have a high-deductible health insurance plan.

Recommended: HSA vs. FSA: What Are the Differences?

17. Home Mortgage Interest

If a young adult is fortunate enough to own their own home, they may qualify for the home mortgage interest deduction, which allows them to deduct home mortgage interest on the first $750,000 of their debt.

18. State and Local Tax Deduction

Under federal rules, taxpayers who itemize may be able to deduct up to $10,000 of certain state and local taxes from their taxable income.

19. Charitable Contributions

Young adults who itemize may be able to deduct charitable donations on their return. Just remember that federal law limits cash contributions to just 60% of their AGI for the year. It’s always best to keep receipts and records of charitable contributions in order to take the deduction.

20. Medical Expenses

Healthcare is very expensive, but the IRS allows taxpayers to deduct the amount of total medical expenses that exceed 7.5% of their adjusted gross income (AGI). Medical expenses include payments for diagnosing, preventing, and mitigating disease.

21. Residential Energy Credit

If a young adult is lucky enough to own their own home and invests in qualifying clean energy (think heat pumps, solar panels, geothermal energy), they may be able to claim up to 30% of the costs as a tax credit.

The Takeaway

Making smart use of tax deductions can help maximize a tax refund or minimize tax liability. Even if you are a student or a young person, you may be able to claim deductions and credits that make a difference on your tax return. You might even qualify for a tax refund that you could use to pay down debt or sock away in the bank to earn interest.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

About the author

Kylie Ora Lobell

Kylie Ora Lobell is a personal finance writer who covers topics such as credit cards, loans, investing, and budgeting. She has worked for major brands such as Mastercard and Visa, and her work has been featured by MoneyGeek, Slickdeals, TaxAct, and LegalZoom. Read full bio.

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Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

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Brokerage checking accounts combine the everyday usability of a checking account with the investment potential of a brokerage account, allowing you to manage both your bills and investments from a single platform. Often referred to as a “cash account” or “cash management account,” these accounts offer flexibility — you can buy, sell, or trade securities whenever you wish without facing penalties.

Understanding what a brokerage checking account is and how it works can help you determine if this type of account makes sense for your banking needs.

Key Features of Brokerage Checking Accounts

Investing can become quicker when you have an investment checking account, especially for active traders or those combining their checking and investment accounts. It gives you direct access to the stock market without the delays of traditional transfers between accounts.

Similar to other brokerage investment accounts, these accounts are not tax-advantaged. Here are some other noteworthy features.

💡 Quick Tip: Are self-directed brokerage accounts cost efficient? They can be, because they offer the convenience of being able to buy stocks online without using a traditional full-service broker (and the typical broker fees).

Linked to Brokerage Investment Accounts

Brokerage checking accounts let you invest directly from your account, so there’s no waiting for transfers to start investing. Instead of opening one with a bank or credit union, you’ll need to go through a brokerage firm to get a brokerage checking account. Brokerages typically charge fees for opening and maintaining them.

Debit/ATM Card Access to Funds

Brokerage checking accounts generally offer checks, a debit card, and ATM access, similar to other types of checking accounts. Depending on the brokerage you choose, you might also get perks like ATM fee refunds or earn interest on your account balance.

Some brokerages may even waive foreign transaction fees when you travel abroad.

Benefits of a Brokerage Checking Account

Brokerage accounts with checking offer features like traditional bank checking accounts, but they often come with additional benefits not typically found in standard checking accounts.

Easily Move Money Between Investments

For active investors who trade regularly, investment checking accounts may simplify the trading process. Depending on your brokerage’s rules, you may be able to buy securities straight from it. This can make investing quicker and more convenient, streamlining the whole process.

💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.

Potential for Higher Interest Earnings

Depending on the brokerage you choose, some accounts stand out by offering high annual percentage yields (APYs), allowing you to earn more interest on your money compared to regular checking accounts. This can make them a good choice for growing your savings while still having easy access to your funds.

Integrated Money Management

Instead of juggling separate accounts for savings, spending, and investing, investment checking accounts let you manage all your money under one umbrella. This means you can handle everything from one place, making it potentially easier to keep track of your finances.

Potential Drawbacks

While brokerage accounts with checking have many advantages, there are a few drawbacks to consider.

May Require Minimum Balances

While some brokerages let you open accounts with no upfront cost, others require an initial deposit. Additionally, you may need to keep a specific balance in your account to avoid incurring maintenance fees.

Fees for Certain Transactions

While brokerage checking accounts typically have low relative fees, you might still encounter some costs for opening and maintaining your account. Additionally, certain brokerages may require you to connect a separate investment account, which could come with additional fees. It’s a good idea to check the specific terms and conditions of each brokerage to understand all potential costs.

No In-Person Service

If you choose an online brokerage firm, remember that you may not have access to in-person services. These firms operate entirely online, so you won’t be able to visit a physical branch for face-to-face assistance. Instead, all your interactions will be digital, through their website, app, or customer service hotline.

Eligibility and Account Opening

Before selecting a brokerage account with checking, make sure to compare your options by looking at fees, interest rates, and accessibility. Then once you’ve picked a brokerage firm, you can usually get started by opening your account online. If you opt for an online brokerage firm, that’ll be your main route.

You’ll need to have your personal details ready and transfer money from another account to fund your investment checking account. Most of the time, there’s no need to meet a minimum balance requirement just to get things up and running.

Comparing To Traditional Checking

Choosing asuitable checking account depends on what you need and what you’re looking for in your banking experience. Whether it’s easy access, fees, or extra features, understanding the differences between traditional and brokerage checking accounts can help you make a smart choice. Let’s break down the main factors to compare.

•   Opening and maintenance fees: Traditional checking accounts usually have minimal opening fees and low maintenance costs, especially if you use your account abroad or maintain a minimum balance. Brokerage checking accounts also tend to have low fees, but some may require a significant initial deposit or a linked investment account, which could involve additional fees.

•   Access: Traditional checking accounts offer convenient in-person access through branches and ATMs. On the other hand, brokerage accounts with checking linked to online brokerages may not have in-person services, although they typically provide ATM access.

•   Features: Both account types generally include essentials like check-writing, debit card access, and online bill pay. Brokerage checking accounts often go further by offering investment options such as direct investing from the account and sometimes perks like ATM fee reimbursements.

•   FDIC Insurance: Money in traditional checking accounts are FDIC-insured up to $250,000, ensuring your money is protected. Similarly, some brokerage checking accounts may hold your uninvested funds in FDIC-insured banks, providing comparable security. But you may need to opt-in, and generally, this may not be standard practice.

The Takeaway

Brokerage checking accounts may give you the best of both worlds:allowing you to handle your everyday banking needs while also offering investment opportunities. In effect, you can manage your bills and investments all in one place, with direct access to the stock market. However, before you decide if a brokerage checking account fits your needs, be sure to compare fees, interest rates, and how accessible it is for your financial goals.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

FAQ

What banks offer brokerage checking?

Online and traditional brokerages may offer brokerage checking accounts, but keep in mind they can differ significantly. So, take your time to shop around and find one that really suits your needs, with the features you want and fewer fees.

Can I have multiple brokerage checking accounts?

Similar to how you can have multiple investment accounts, you can have multiple brokerage checking accounts.

Are brokerage checking accounts FDIC-insured?

Brokerage accounts are backed by the Securities Investor Protection Corporation (SIPC) if your brokerage firm shuts down. For uninvested money, brokerage checking accounts usually keep it in FDIC-insured banks, just like regular banks do. Some firms might also offer extra FDIC coverage by using multiple banks.

About the author

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.