This article was written by guest blogger Eva Rosenberg.
Online tax software companies guide you through the tax-filing process by highlighting life changes during the past year, but you can do the same thing on your own. What happened last year that might affect your taxes this year? Take stock now, before you file.
Here are seven life events that can impact you when filing your taxes:
1. Getting engaged. Being too in love to discuss finances before marriage can lead to financial conflict, tax problems, and possibly divorce.
2. Getting married. For the average person, marriage brings a variety of tax benefits, but those in high-income brackets can face tax shock. Several taxes are triggered when your combined incomes exceed approximately $400,000, and you could be responsible for your partner’s tax troubles.
3. Having a baby. This is one of the biggest life changers—and that includes when you are filing taxes. A new baby provides an extra exemption, a child tax credit, and (perhaps) a child and dependent care credit, among several other tax benefits.
4. Selling your home. Some people make a practice of selling a home every few years, while others nest comfortably for years before selling. After you’ve sold your home and the trauma of the move has passed, it’s time to think about the tax implications of selling your home.
5. Getting divorced. When you get divorced, many things can be a challenge. Decisions need to be made about who cares for the children, who stays in the family home, who gets the pets, etc. And then there are tax issues to face.
6. Retiring. Retirement is a long-awaited reward for many, but it can also be stressful. After years of savings, it’s time to start withdrawing and spending—without having a steady income on which to rely. If you’ve just retired or are nearing retirement, keep in mind the tax implications of withdrawing your retirement funds.
7. Inheriting money. If you inherited money in 2016, there could be tax implications when you file this year. Review your inheritance and talk to a tax professional; the type of taxes you might pay on an inheritance and the amount you might owe will depend on the type of inheritance you received.
I’ve covered birth, death, marriage, divorce, retirement, and home sweet home. Don’t be surprised if other major changes in your life, such as job loss, impact your taxes. Whenever you experience a big life event, you may want to check in with your tax professional, or at least do some research on your own, to understand what it means for your taxes.
What other issues have you found impact your taxes?
Eva Rosenberg, EA, is the publisher of TaxMama.com®, where your tax questions are answered. She teaches tax professionals how to represent you when you have tax problems. She is the author of several books and e-books, including Small Business Taxes Made Easy. Follow her on Twitter: @TaxMama