Just when you think you might have a firm grasp on your taxes, life comes along and changes everything! There are certain life events that are going to impact how much you pay in taxes. For the most part, these can be positive changes, but changes that you should be aware of nonetheless. Here are just a few examples:
Though you may not have been thinking about how it would impact your taxes when you either proposed or accepted a proposal, marriage definitely brings with it a change. In most situations, filing jointly as a married couple will lower your tax rates and allow for higher deductions.
It might be impossible to think that you could love your children anymore than you already do, but knowing that each new bundle of joy brings with it a dependent tax deduction and access to the Child Tax Credit might change your mind. Children bring many other potential tax benefits down the road as well including tax credits for education to Earned Income Tax Credit.
Buying and Selling a Home
There are many different tax deductions you can take advantage of when you buy a home. These benefits include mortgage interest you pay as well as real estate taxes. When it is time to sell a home, you can actually avoid certain gains taxes by filing jointly with your spouse.
Are you planning on retiring someday? All of those contributions you are making to your 401(k) account or other types of retirement accounts can actually bring some beneficial tax deductions. Be prepared though, as you may face taxes when it comes time to take money out of your retirement plan.
College students are always looking for a financial break wherever they can find one. Fortunately, as a student, you may be eligible for tax deductions on qualifying educational expenses. You can also deduct up to $2500 from interest paid toward a student loan. Additional education costs, such as those incurred by earning professional certifications, can also be written off.
It’s natural to want to move up in your company via a promotion. That increase in salary can be a nice reward for all of your hard work. Keep in mind that with that increase in pay, you may also find yourself in a higher tax bracket where you now pay more per dollar than you did before. The higher salary is definitely worth it, but it’s still something to keep in mind when tax time comes around.
If you have questions about other life events that are not listed above and how they will affect your taxes, please feel free to give the tax experts at Hacker Accounting a call today at 602-375-5251.