The ringing of wedding bells. The cries of a new baby. The turn of a key into a first home.
Like any big life change, all of these moments are reasons to celebrate, as well as cause for new sets of hopes, worries, dreams and concerns. Though it’s not always top of mind, being aware of how each change may affect your taxes is a way to help smooth over any life transition. You can navigate those transitions and maximize your return through our Volunteer Income Tax Assistance (VITA) program. Here are a few examples of life changes and how they may affect your tax return:
As a newlywed, you have a new tax filing status. The married filing jointly status has more favorable tax rates and qualifies taxpayers for more tax benefits than the married filing separately status. This isn’t always the case, though, so make sure to do your research or work with a VITA volunteer to know what makes the most sense for your situation.
Having a child.
If you’re a new parent, you may qualify for a child tax credit or claim your child care expenses. It’s easier to qualify for the Earned Income Tax Credit because the income limitation more than doubles once a child comes along. Depending on your circumstances, it can be a significant boost – as much as $6,000+ for a qualifying family. However, eligibility can vary year-to-year because it’s tied to income, filing status and size of family, but our VITA volunteers can help you make sure you’re filing appropriately.
Buying a home.
When you buy a home, thinking about itemization becomes important because homeowners may deduct expenses like mortgage interest and real estate taxes. However, you’ll only benefit from itemizing if your itemized deductions are larger than the standard deduction, which will almost double in 2018. If you’re a seller, there are some important things to keep in mind, as well. VITA volunteers are trained to help you navigate either scenario and make sure all of your records are in order to get the most out of your return.
Starting a business.
Becoming self-employed, even through the shared or gig economy, can have one of the biggest tax impacts. If this applies to you, keep in mind there are a variety of factors at play: you’ll get different information-reporting documents, you’ll file a different form with your tax return, you’ll pay estimated quarterly taxes instead of having tax withheld from a paycheck. Regardless of your situation, VITA volunteers know how to help you maximize your return.
For more tax tips, visit our blog, and learn more about VITA here.