As your life changes, your tax return will often change along with it. Any of the following major life events will impact your tax return and how much you owe each year in taxes.
Marriage
Getting married will cause several changes to your tax return:
- Your filing status will now be married filing jointly or married filing separately.
- Your standard deduction will double if you file jointly.
- The income thresholds for each tax bracket will increase if you file jointly.
You may want to adjust your withholdings or estimated tax payments to account for all of these changes to your tax return.
Divorce
Your filing status will revert to either single or head of household after a divorce. Once again, you should adjust your withholding to reflect these changes.
If you are paying alimony, you’ll have to include it in your gross income unless your separation agreement was finalized before the end of 2018. Alimony recipients can now exclude their alimony payments from their gross income.
Tax debt incurred during marriage will continue to be the responsibility of both spouses unless you seek and receive innocent spouse relief.
Birth of a Child
Dependency exemptions were eliminated under the Tax Cuts and Jobs Act (TCJA). However, the Child Tax Credit was expanded, which could result in even bigger tax savings.
If your child is 17 or older or if your dependent is a qualifying relative, you can take the tax credit for other dependents.
Buying a Home
You may qualify for several tax breaks if you buy a new home:
- The home mortgage interest deduction.
- Property tax deduction.
- Home office tax deduction.
However, the TCJA placed new limits on your ability to deduct some of these expenses. The standard deduction was also increased, so you may not need to itemize even if you own a home.
Starting a Business
Self-employed taxpayers have more responsibilities than employees. They need to pay estimated taxes and pay both halves of their Social Security and Medicare taxes.
They also get to claim business expense deductions on Schedule C. Entrepreneurs need to put in more work to do their taxes, so work with a qualified tax preparer to make sure you get all the deductions you deserve.
The Gartzman Law Firm offers tax return preparation and tax settlement help. Use our contact form to request a consultation with an Atlanta tax resolution attorney.