Last year, like every other year, there were tons of tax law changes approved at the last minute. Tax law changes cause concern and confusion for taxpayers and are the cause of many overlooked tax benefits and omitted tax deductions. Just like a new speed limit sign on your street or new traffic light, changes to normal day-to-day rules and new things cause confusion and take time to be fully understood. Though tax law changes can be difficult to know and understand - they are much like a road map, if you have an idea where you are going and you follow the directions you will get where you want to go. More confusing and often overlooked for many taxpayers are life changes, which often result in changes on your tax return that you not only didn't know about, but also did not realize you might be leaving money on the table if you didn't take the right turn.
Managing Your Taxes After a Life Event is the IRS webpage dedicated to providing information about events that can have a significant impact on your taxes. These days, family changes are becoming increasingly varied, and include situations such as taking care of a parent or family member who needs help or welcoming an older child back into the family home. These types of changes can create some big changes to your taxes. As part of your "tax household" these additional family members must be insured or you may be subject to the penalty according to the Affordable Care Act; the penalty is based on your household income and the number of uninsured individual in your house. These life changes can also affect the deductions, credits, benefits, even the filing status you are eligible for so it is important to determine what you qualify for and how to claim it.
When it comes to higher education, there are about a dozen tax benefits, which can save you money at tax time. It is not just tuition - books, materials, and even travel costs related to your education can all be qualified expenses. If you, a family member, or a dependent have higher education expenses, be sure to understand all of the tax benefits available so you can take advantage of the deductions and credits you deserve.
If you had a significant employment change last year, it could have a big effect on your taxes now and for years to come. New deductions, such as home office or vehicle expenses, may be available and new filing requirements may apply. If you started your own business, more recordkeeping and self-employment tax must be figured. Figured completely and properly, your new employment status could net you serious bucks at tax time. Figured partially or incorrectly, you may wind up with additional taxes when you least expect them.
Investing in a home can generate a variety of opportunities for tax savings from the year of purchase and well into the future. Building or moving into a new home may allow you to take advantage of itemizing some deductions such as, moving expenses, mortgage interest, and real estate tax deductions. Meanwhile, if you spruced up your old home, certain improvements may reduce your tax burden by lowering your capital gain if you sell your home in the future.
Life changes aren't something people recall come tax time or they don't remember to tell their tax pro. I recommend taking a bit of time and consider adding a note about the life events to your shoebox, folder, drawer, or wherever it is that, you keep all your tax stuff during the year. That note may jog your memory or cause your tax pro to ask you what the note about "Grandma moved in" means. Taking full advantage of life changes on your taxes could add more money to your refund. Of course, with all things tax, if you aren't sure how to handle a life change or want to make sure to minimize your tax burden or better maximize your refund seek the help of a tax pro. There are better things to be doing with your time than figuring out your taxes.