When you go through big events in your life, it is important to consider if that big event will impact your taxes. Many important life events can actually have an impact on your taxes.
#1: Buying a Home
If you are making a move from being a renter to a homeowner, it is important to be aware of all the new deductions available to you if you itemize your taxes. You can deduct your real estate taxes, qualified home mortgage insurance, and private mortgage insurance. You may also benefit from things such as residential energy credits if you pay to have energy-efficient appliances installed in your home.
You will want to figure out how much all these new deductions are and, in combination with your overall tax situation, determine if you should itemize your deductions instead of taking a standard deduction.
#2: Changing Jobs
When you change jobs, you will have to report multiple sources of income on your taxes. You will also want to make sure that you know how much you should be withheld from your paycheck for taxes. It is best to get your withholdings just right so that you are not over or underpaying on your taxes.
Suppose you have to take any training classes or certifications for your new job, and you have to pay for that professional development yourself. In that case, you may be able to deduct those expenses.
#3: Adopting or Having a Child
If you add a child to your family, your taxes are going to change. You will want to make sure you obtain a Social Security number for your child so that you can add them to your tax returns. When you add your child to your tax returns and claim them as a member of your family, you will be able to enjoy a federal child tax credit as well as deductions for qualified childcare expenses.
If you adopted a child, you might be able to get credits for the court costs, adoption fees, and transportation expenses that you paid as part of the adoption process.
#4: Getting Married
Getting married is another life event that can significantly impact your taxes. Once you are married, you have to decide if you will file "married filing jointly" or "married filing separately." It is essential to review your financial situation as a couple to determine which is the best way to file, but you may find that you will save money on your taxes filing together.
If you have had a significant life change, you will want to discuss that life change with your tax consulting professional. They will help you figure out how that life change will impact your taxes and help you make the appropriate adjustments to your taxes.