When you go through a major life change, the last thing on your mind is your eligibility for tax credits and deductions. However, your eligibility will change according to your life situation, and the complexity of tax law makes it difficult for many people to predict how these events will impact their eligibility until they file. Below are three examples of major life changes that can raise or reduce your tax bill.

3 Life Changes That Impact Your Taxes

1. Marriage

Getting married used to expose couples to significant tax penalties, especially in dual-income households. However, the tax law overhaul changed this by doubling the standard deduction for married couples and adjusting the tax brackets. One of you may also be able to file as head of household, which offers a substantially higher standard deduction, potentially saving thousands of dollars on your taxes.

2. The Birth of a Child

Tax law includes a variety of deductions and credits designed to reduce the financial burden on parents. You may be eligible for the refundable child tax credit, as well as deductions for health and child care expenses. Single parents may also be able to change their filing status to head of household, which features a larger deduction and lower income tax liability.

3. Divorce

The end of a marriage may also trigger changes to your liability, which should be taken into account before filing season. The standard deduction for single taxpayers is half that of married couples, and you will lose the other tax benefits of marriage. However, the loss of your former spouse’s income may reduce your overall exposure and make up the difference.
 

For more than a decade, Corey C Davis CPA Attorney at Law has offered in-depth financial and legal services to clients throughout Kerrville, TX. With his team’s thorough understanding of tax law and broad range of financial tools, you can rely on them to help you meet the challenges of any major life change. Visit their website for an overview of their services, or call (830) 257-8800 to discuss your needs and make an appointment.