When Life Changes – Your Taxes Might Too04.04.14
You may be used to seeing “overlooked tax deductions” and
“Top 10” lists during tax season. The tips in those might not apply to you, but
there’s one thing that every taxpayer can watch for: life changes. And since
life tends to change from year to year, it’s worth looking for recent
experiences that might help you get more out of your tax return.
Here are the top three types of common life changes that can
help reduce your taxes. If you already filed your tax return, and you see
something that is applicable, you can always go back and amend your return for
up to three years to get credit for the change.
CHANGES: Getting Married, New Baby, New Home, Divorce
When people think of life changes, the usual ones that
come to mind include the big ones like getting married, having a baby, buying a
home or other large life altering events. Each of those big changes can also
create change on a tax return. New deductions, credits, benefits and other considerations
need to be taken into account, and in most cases, can lower your tax liability.
CHANGES: New Dependent (Parent, Son-In-Law), Returning Dependent (Child
moving back in) New Self-Employment, New Education Expenses
It’s increasingly common today for taxpayers to care for
additional family members both physically and economically. Taking care of an
older parent, a family member who needs help or even an older child that has
moved back into the home can produce a tax benefit. Each of these drive changes
to a tax return, including a possible additional dependent exemption and
deductions and credits related to other expenses such as medical and education
Many taxpayers are also taking on new business ventures.
From small businesses in the home, to part-time consulting work or more
elaborate small businesses, these can drive changes to your tax return and
create new opportunities for benefits never before available.
Finally, if you, a family member or a dependent have higher
education expenses, be sure to understand all of the tax benefits available,
including both deductions and tax credits. There are about a dozen tax benefits
related to higher education that can save you money by increasing your tax
refund or reducing the amount you owe.
LIFE CHANGES: Moving, Job Loss, Retired
Taxpayers who have moved or retired need to take many tax
considerations into account. Some are required, like changing your mailing
address with the IRS, but other considerations, such as moving deductions,
decisions related to the timing of retirement plan distributions, and even
where you live during retirement, can have enormous bottom line tax impact on
your current and future tax returns (especially state tax returns).
For taxpayers who have been displaced or laid off for any
period of time, there are many potential changes for your tax return related to
changes in income level. There may be many impacts to your tax return such as
the taxation of unemployment benefits and the ability to claim certain income-related
credits and deductions previously not allowed.
Tax changes are very common every year and are a part of
tax-filing life in America. Take advantage of them where appropriate. As you
organize your tax documents in preparation for filing, take a bit of extra time
to reflect on your year and look for those changes, and talk with your Jackson
Hewitt Tax Pro if you need more information before, during and even after your
tax return has been prepared.