As you experience various life events, you’ll also experience changes in your tax situation. Some will help you, some will hurt, but the important thing is to report your taxes correctly and know how each situation will affect you.
While this is not an all-inclusive list, here are six situations that can impact your taxes.
You have two filing options after you’re married: “married filing jointly” or “married filing separately.” Filing jointly may entitle you to more tax benefits.
You should also ask your HR department if you can review your W-4 to ensure you’re not under-withholding.
Having a Baby
A child adds a dependent to your tax return, which can be a significant deduction for you. You may also be able to use the Child Credit for $1,000.
Children may bring additional deductions as well, such as the Dependent-Care Credit.
Buying a Home
Plenty of tax deduction opportunities open up when you own a home. You may be able to deduct for things like:
- Property taxes
- Mortgage interest
- Green improvements
- Interest paid (up to $100,000) on a home equity loan or HELOC
It’s a good idea for homeowners to research all the possible deductions prior to filing.
Getting a Divorce
A divorce means you’ll switch back to the “single” filing status, and you’ll once again need to look at your W4 to adjust withholding.
Depending on your situation, you may need to figure out how dependents, alimony and/or child support fit into the equation.
Going to College
For students and parents of students, higher education can bring tax deductions. Look into Educational Tax Credits such as the Hope and Lifetime Learning Credits and American Opportunity Credit. Any student loan interest paid is also a tax deduction.
Getting a New Job
If your new job required you to move or purchase supplies out of your own pocket, they might qualify for tax deductions.
Get the Most Out of Your Return
It helps to be informed so you can ensure you’re maximizing your refund. You can consult with an account if you have complex issues, or use an advanced TurboTax product to walk you through possible deductions and credits.