7 Important Life Changes That Impact Your Taxes

With life, situations change and they come with certain tax implications.

One year makes a difference. From getting married, transitioning into a new job to having your own bundle of joy, your tax situation changes as well.

Here are some examples.

1. Tying the knot

Getting married is a big step in everyone’s lives. Along with getting married, you now are able to file jointly which should lower your tax rate. For the 2018 tax year, your standard deduction is now $24,000. With that in mind, don’t forget to update your allowances (Form W-4) at your job.

That being said, if you are married on December 31, 2019, you are considered to be married for the full year. Therefore, if you already filed a tax return as an individual, you’ll need to amend your tax return to update your filing status to either married filing jointly or separate.

For those of you who are changing your name, you will need to contact the Social Security Administration to file a form SS-5 as soon as possible. This is important when tax time rolls around because your tax return will be rejected if the name you are filing with does not match the name for your social security number.

If this happens, you can simply file with your original name and correct it next tax season with the Social Security Administration.

2. Birth of a baby

Although you can no longer claim your baby as a personal exemption, you can still claim deductions. For instance, you can claim the Child Tax Credit, the Earned Income Credit, and the Child and Dependent Care Credit.

For the current 2018 tax year, the Child Tax Credit is $2,000 per child with a refundable amount of up to $1,400 per qualifying child as long as you meet certain income requirements. The Child and Dependent Care Credit goes up to 35% of $3,000 for qualified childcare expenses for children under 13.

Another important tax reminder would be obtaining a social security card for your newborn. You can do this right at the hospital when you apply for a birth certificate. This prevents you from having to go through the trouble of filing Form SS-5 and providing proof of your baby’s age, identity and United States citizenship.

Just like marriage, you can claim another allowance for your child on your W-4! This means that fewer taxes are being withheld from your paycheck.

3. College

Are you taking college classes or sending off your kids to college this year? Luckily for you, you can claim the Education Credit. You can claim either the American Opportunity Tax Credit or the Lifetime Learning Credit.

The American Opportunity Tax Credit goes up to $2,500 per year for each dependent which you pay tuition. As for the Lifetime Learning Credit, it’s worth up to $2,000 per tax return.

4. Divorce

In the case that you become divorced, your tax status changes to single or head of household. When completing your taxes, your standard deduction as a single filer for the 2018 tax year is $12,000. As for the head of household filers, their standard deduction is $18,000.

You may be wondering, does this impact alimony payments? If you are divorced after December 31, 2018, and you’re paying alimony, you can no longer deduct it on your tax return. On top of that, it is also tax-free for the recipient as long as the payments are according to a divorce/separation agreement.

However, any legal separations/divorces that occur before December 31, 2018, alimony is still deductible. Those who received the alimony must also report it as taxable income on their tax returns.

5. Getting a new job

For prior-year tax returns before 2018, you can deduct your unreimbursed W-2 job expenses. For example, you can deduct meals and entertainment, travel, office supplies, books, vehicle expenses, and moving expenses.

On the other hand, for the tax year 2018 and onward, those who claim job expenses are limited. Only the following workers can deduct job expenses:

• Armed Forces reservists
• Qualified performing artists
• Fee-basis state or local government officials
• Employees with impairment-related work expenses

Take advantage of claiming your expenses for your prior year tax returns if you haven’t filed them as yet.

6. Buying a new home

Nothing feels better than purchasing your first home, or one that can support your growing family. Along with a new home, comes new tax benefits. You can deduct the interest you pay on your mortgage such as debt relating to improving your home.

Overall, the home mortgage interest deduction reduces your taxable income by the amount you pay on a loan. This loan has to directly be secured by your principal residence. For the 2018 tax year, you can deduct state and local property taxes of up to $10,000 combined with your spouse.

7. Death of a spouse/family member

Mourning the loss of a family member is difficult; as well as finding out that you’re not off the hook with taxes. You may have to file a tax return and indicate that it’s for a deceased taxpayer; if they’re required to file a tax return.

In the case that you inherit money or property, you may owe estate taxes. Nonetheless, the lifetime exclusion was raised to $11.180 million for 2018.

With tax changes, comes tax help.

Whether you have to file prior year or current year tax returns, you can file with us. Our customer service representatives are here to assist you every step of the way.

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This entry was posted on Tuesday, August 6th, 2019 at 2:22 pm and is filed under Tax and Life Changes, Tax Deductions and Credits, Tax News, Tax Tips and Tricks, Taxes for Prior Years. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.