If you’re planning a wedding, painting a nursery, or bringing your
“baby” to visit colleges, the last thing you’re thinking about is filing your
taxes. But that’s why you have us, to remind you! Life changes can cause some
of the best tax benefits and tax deductions there are, and they’re much more
common than you might think. But missing one could leave tax dollars on the
table and out of your pocket. Adding a
dependent, or a spouse, for example, to your return does not automatically
qualify you for new deductions and credits, so you should be aware of what is
available to you. As your life changes throughout the year, it’s a good idea to
review your tax situation to make sure you don’t end up with any surprises come
tax time.
For instance:
Did you get married this year? Now that
you’re married, filing a joint return will give you higher standard deductions,
lower tax rates, and give you two exemptions of $3,800 a piece, even if only
one of you worked. You can still file
separately, but you’ll lose the benefit of claiming tax credits and deductions
that are available to you as a married couple. Plus, you lose your spouse’s
exemption and you are generally in a much higher tax bracket.
Did you bring home a baby? Having, or adopting, a child can
significantly reduce your tax liability, not just your sleep! As a parent you
may be entitled to a dependent exemption of $3,800 per child as well as a
$1,000 Child Tax Credit for each dependent child under the age of 17. If you’re
married, and you and your spouse work, you may also be entitled to a credit of
up to $2,100 for daycare expenses for children under age 13.
Did you become the primary caretaker for Mom or Dad? If
so, you may be able to claim your parent(s) as a dependent. If you are paying their
medical expenses, or nursing home expenses, you may be able to claim them on
your tax return. If you work, you may even qualify for a credit for the expense
of home health care, senior daycare, or care in your home.
Did you change jobs, receive a promotion, increase your 401(k)
contributions, or become self-employed? The expenses of looking for a new
job, such as 55.5 cents per mile for driving to job interviews, employment
agencies and headhunters may be claimed on your tax return. You may also be able to claim the expenses
you have for creating a resume, contacting potential employers long-distance,
and out-of-town travel.
If you were promoted this year,
you may need to increase your withholdings so you do not owe come tax time. Conversely,
if you have increased your contributions to a 401(k), you may want to reduce
your withholdings to get more money in your paycheck, instead of a large refund
at tax time.
If you started your own business
you need to be sure you are
keeping
records of the miles that you are driving for your business and the
expenses you have from pens to employee benefits.
Did you become a homeowner? If you purchased, sold, or
arranged a short-sale of a home, there are things to consider come tax time.
While most costs associated with the purchase or sale of a home are not
directly deductible, they can be used to adjust the basis of your home to keep
your gain below the $250,000 ($500,000 if married filing jointly) tax exempt
amount when you sell. The mortgage interest and real estate taxes you pay each
year for your home may be deductible on your tax return.
So, if you have had a “life changing” year, you’ll want to make sure you take the time to review how it all affects your tax return, it could save you a lot of time and money when you file your tax return in 2013.