Life events that can impact how you do your taxes

On Behalf of | Apr 17, 2021 | IRS Tax Law

People in Texas might need to rethink how they do their taxes whenever they go through certain life-changing events. Some of these changes can offer tax benefits while others might cause tax increases. Here is a brief look at how certain life changes might affect your taxes.

Marriage

When you get married, you can choose to file a joint income tax return with your spouse. Doing so provides multiple tax benefits that can help you to save money on your taxes. Married couples can benefit from a higher standard deduction. You might also have to update your name with the IRS and the Social Security Administration and change your deductions at your job on form W-4. When you divorce, you will no longer file as married filing jointly. Instead, you will need to change your tax filing status to either single or head of household. Both offer lower standard deductions than what is allowed for a married couple. Depending on your income, your tax bracket could change.

Children

Having children also can affect your income taxes. Children might allow you to benefit from tax credits for child care costs and the earned income credit. You might also be eligible for the child tax credit and other credits and deductions. Opening a qualified education savings account for your child can also allow you to save money on a pre-tax basis to help fund your child’s future education.

Other changes

Other life changes can also affect your taxes, including unemployment, retirement and becoming self-employed. People might want to discuss how the changes in their lives might affect how they file taxes and what the changes might cause under IRS tax law. Planning ahead might help people to avoid unexpected tax liabilities and large tax bills during tax season.