When it comes to taxes, failure to plan adequately can leave you faced with costly penalties and late fees as well as surprises of additional taxes owed. That's why it's important to take time to plan your tax management, including your contributions, expected obligations, and any potential changes that might occur throughout the year. In fact, there are a few common changes that occur in life that necessitate tax planning considerations. These are some of the most common changes that should remind you to update your tax planning.
Are You Facing Marital Status Changes?
Your marital status has a significant effect on your tax obligations. When you get married, you'll have to plan for name changes, tax status declarations, and even changes in your tax bracket as a result of your marital status. Remember that the IRS considers your marital status as of the end of the year in your filing, which means that you file as married even if you didn't get married until December 31st of the tax year.
Are You Welcoming a Child?
Whether you're having a biological child or adopting, welcoming a child into your home will affect your taxes. Remember that bringing a child into your home means that you have an additional dependent to list on your taxes. That reduces your taxable income. You might also qualify for the child tax credit for the year. Adopting might further reduce your tax obligations with deductions for legal fees and other costs.
Are You Buying a Home?
If you are buying a home this year or next, it's in your best interest to take some time to consider the tax implications. You'll have new deductions available to you, including real estate tax deductions, recognition of private mortgage insurance, and more. Even if you don't want to itemize your taxes, there are other credits and deductions to consider.
Are You Changing Your Job?
When you change your job, you need to consider your tax withholdings and the forms traditionally submitted for payroll at hiring. Think about adjusting your withholding so that you balance your paycheck with a reduced risk of paying in at the end of the year.
These are just a few of the things that you need to think about when you're considering the tax implications of many different life events. The more you understand how these things affect your taxes, the easier it is to complete the tax planning steps that you need to take. Reach out to a tax planning service near you to learn more.