Tuesday, January 20, 2015

6 Life Events That Change Your Taxes / From birth to death, how you live your life will affect how you file.

Geoff Williams for US News World Report writes: Somewhere, in a drawer, or on your phone or computer, you have photos of birthday parties, holidays, vacations, weddings and births. A wave of nostalgia probably courses through you, as you marvel at how your life has changed over the years. In fact, you could likely experience those same emotions by perusing other evidence of your life’s milestones: your old tax returns.
To be clear, nobody is suggesting you do this, but it’s important to remember that as your life changes, so too will how you prepare your taxes. Before the April 15 deadline hits, make sure to ask yourself: How has my life changed in the last year? These six milestones can really make an impact on your taxes.
You're newly married. One of the first decisions to make after tying the knot is whether to file your taxes jointly or separately, says Mike Campbell, a San Francisco-based tax partner at BDO USA, a business services practice headquartered in Chicago.
"For the majority of couples, filing jointly is the easiest administratively, especially if you live in a state that taxes income on a community property basis," Campbell says.
But that decision may also come with a price: potentially higher taxes. Some couples discover their tax tab is higher "because of the withholding levels on salaries,” Campbell says. “While the withholding taxes paid through payroll may have been sufficient for each spouse when they were filing as single taxpayers, the combined income as a joint couple may lead to a combined higher tax bracket,” he adds.
To help avoid surprises come tax time, Campbell suggests consulting your company's human resources department, and taking advantage of withholding calculators offered on the Internal Revenue Service’s website.
Bonus tip: If you've changed your name, make sure to let the Social Security Administration know. That way, you will avoid a mismatch between the name on your tax return and the name associated with your Social Security number, says Keith Baker, a professor of mortgage banking at North Lake College in Irving, Texas. If you don’t take this step, your tax return could get delayed until the inconsistency is resolved.
If there simply isn't time to do that, you should be fine filing jointly, provided the names on your tax forms match what appears on your Social Security cards.
You just bought a house. Hopefully your new home has an office where you can do your taxes. But whatever its comforts, your new residence will offer opportunities for deductions.
"A homeowner's interest and real estate taxes are tax-deductible," Baker says. To take advantage of these deductions, homeowners must itemize them. Note: You'll only get the maximum tax benefit if the actual cost of the interest and real estate taxes are more than the standard deduction.
Baker says most homebuyers borrow the money for most of their purchase price and pay points on the loan. "These are tax-deductible," Baker explains, adding that you can determine the interest on IRS Form 1098 when you receive it from the IRS. SNIP, the article continues @ US News World Report, click here to continue reading....


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