Life’s little changes are inevitable, whether they’re actually little or so big they block everything on the horizon. Knowing how some of those changes can affect your taxes will help you prepare for them in advance.
Getting married or divorced, although a huge life event, is an easy one tax wise. Two people = a larger standard deduction ($12,600 VS $6,300) and more personal exemptions ($8,100 VS $4,050). It may also affect your tax bracket. This is a good time to check with your payroll person and make sure your W-4 reflects the correct amount of dependents so you don’t get caught short at the end of the year. The more dependents you claim, the more money you receive on your paycheck and the less money that is paid in federal withholding. Ask your tax prep person to review your pay stub and be sure you’re withholding enough. Divorce works in reverse, but may also change your filing status and alimony could be involved.
Having a baby may add many sleepless nights, but it also adds a new dependent to your return. That baby is equal to another $4,050 in personal exemptions. You may also qualify for child care credit and the child tax credit.
Sending your kids off to college is another big change. When you have a child enrolled in college you can deduct some of their student loans as long as they continue to be a dependent on your return. Even though your child may have a part-time job while in school, they can file their own return and still be considered a dependent on yours. Be aware there’s a limit to how much they can make and still be considered a dependent. Your college student may continue to be a dependent on your return until they are 24 instead of 19 provided they don’t make too much money.
There are other life changes besides these. Moving, getting a new job, buying or selling a house, and even retiring are examples. If you experience one of these, or maybe one I haven’t listed, be sure and contact your tax preparer so you’ll know what to expect at the end of the year and be prepared.