Filing taxes is one of those pesky housekeeping items you have to do every year. No one wants to do it, especially if you have a life event that will drastically affect your taxes.
While you may not be able to prepare for every event that comes your way, you can set yourself up for success by knowing what to do in certain situations. Read on to learn how some common life events affect your taxes.
- Getting Married
There is much to celebrate when a couple gets married. And while taxes aren’t usually one of those things, it’s an important part of building your financial life together.
One important decision for your financial future as a couple is the filing status you’ll choose: “married filing jointly” or “married filing separately.”
While “married filing jointly” typically offers better tax benefits and deductions, “married filing separately” may work better for your specific situation.
When filing your taxes, regardless of which filing status you choose, you must update any changes to your name, address, or health insurance to ensure the information is correct when you file.
Having or Adopting a Child
Growing your family is an exciting time, albeit an expensive one. However, there are several tax credits you can take advantage of when you welcome your new child home.
You can take advantage of child tax credits, childcare credits, adoption expense credits, and more. If you want to save for your child’s education expenses, you can also open a tax-favored education savings account.
So while there are many expenses and responsibilities that come with raising children, there are several tax benefits available to help you out.
Getting a Divorce
Parting ways is one of the hardest experiences you can have, and unfortunately, the tax implications of a divorce don’t make your situation much easier.
In addition to changing your filing status, you will also have to deal with major tax issues like asset division, alimony, and child support if you have children. Your eligibility for certain tax deductions and credits may change as well.
And, as with marriage, you must notify the IRS and other entities of any changes in your name and address to match your tax return.
4. Loss of a Loved One
The death of a spouse or parent is one of the most emotionally devastating situations you can experience. And sadly this time is often filled with difficult tax situations.
If you lost a spouse, you are still able to file jointly the year your spouse passed as long as you haven’t remarried. However, you will have to change your filing status the following year. You may be allowed to file as a widow or widower for the 2 years following your spouse’s death.
Depending on the composition and amount of assets you have, your personal representative may have to file an estate tax return. Once your assets are distributed, your heirs will also be responsible for filing their inherited assets on their tax returns.
Moving Forward With Your Taxes
Not all life events affect your taxes the same way - while there may be benefits to some, there may be complications with others.
If you feel stressed about how you should file your taxes after a major life event, you’re not alone. With the right guide, your tax filing can become a little easier.
AMG Finance is here to help with your tax preparation needs. No matter what you’re going through, we can help you file your taxes in an efficient manner.
Leave the hard stuff to us by using our tax preparation services today. You can also visit us at a local branch for more information on your specific situation.
