Big Life Changes

(And Taxes)

Standard deductions increased significantly in the 2018 tax year, so it might not be worth the effort to itemize, but you’ll want to get a grasp on the tax breaks available to you. Do a rundown of potential tax credits and deductions you could qualify for. Unless you can come up with more than $12,000 in deductions as an individual or $24,000 as a couple filing jointly, you’re better off with the standard deduction.

Read on for some common tax implications of big life changes and check in on your taxes any time your life gets a shake-up. Research on your own at IRS.gov or get the help of a tax specialist if you have an unusual or complicated situation.

MARRIAGE

If you were married on or before December 31, in the eyes of the IRS, you were married for the full year. You must either file a joint return with your new spouse or a Married Filing Separately return. Look at your tax withholding on both of your W-4s with your employers. Use the IRS Withholding Calculator to see if you should be having more or less taxes taken out of your paychecks so you don’t end up owing taxes.

Make sure you report any name changes to the Social Security Administration (SSA) and they will inform the IRS. If the name on your return doesn’t match your legal name with Social Security, your return will be rejected.

DIVORCE

With the passage of the new tax law, you can no longer deduct alimony as an itemized deduction. Make sure that you coordinate with your ex when claiming dependents. You can’t both claim the same children. Update your name with SSA and your W-4 payroll tax deductions.

If you are concerned that your spouse or ex-spouse has been untruthful on your joint tax return, for example, by failing to report earnings accurately or by claiming false deductions, you could be eligible for Innocent Spouse Relief.

HAVING A BABY

Get a Social Security number for your new baby to include on your return in order to get the Child Tax Credit. If you make up to $200,000 as an individual or $400,000 jointly, you earn a $2,000 credit per qualifying dependent.

If you or other family members plan to fund a 529 child savings account to start saving up for college, the new tax law also allows for up to $10,000 per year to be used for K-12 educational expenses under certain conditions. And you could be eligible for the Child Care Tax Credit up to $3,000 for one dependent or $6,000 for two or more.

BUYING A HOME

Mortgage interest paid on a primary or secondary residence can be deducted on your taxes as long as the original principal on the loan was less than $750,000 in 2018. If you initiated the mortgage before December 15, 2017, you can deduct this interest up to $1 million.

BUILDING WEALTH

If you get a large inheritance or you’re starting to acquire major assets, such as your first home or business interests, a reputable tax professional can help you develop a strategy for how to best manage those assets into the future. It’s never too early to put together a plan for how to grow your wealth and manage taxes.

Couple researches how their tax deductions change after getting married.

Are you starting your own business or side gig? You might be eligible for the home office deduction, reimbursement for mileage and vehicle wear-and-tear, or the cost of new business equipment including computers and other technology upgrades.

HEALTH CARE

If you had large medical and dental expenses last year, you can deduct up any unreimbursed costs that exceeded 7.5% of your adjusted gross income for 2018. This raises to 10% for the 2019 tax year.

Any time your life changes, it’s good practice to do a quick scan of your taxes and other accounts, including the beneficiaries on life insurance policies and investments. And it’s never too early to begin thinking about an estate plan, especially when you start a family.

As always, we’ve got your back. — The On Your Own Team End of article insignia



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