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Discover how major life changes like marriage, having a baby, buying a home, or changing jobs can impact your tax refund. Learn how to maximize your refund with key tax credits and deductions.
Your tax refund is more than just a number — it's a reflection of your life and financial situation over the past year. Certain life events, like getting married, buying a home, or having a baby, can significantly affect your tax refund. Understanding these changes is crucial because they can lead to either a larger refund or help you avoid any unpleasant surprises.
In this blog, we’ll explore various life changes and how they impact your taxes. Whether you're planning for marriage, a new baby, or purchasing your first home, these milestones could open doors to tax deductions and credits. Read on to learn how these events can benefit you during tax season and help you maximize your refund.
Marriage is a big change, and it has a significant impact on your tax refund. When you tie the knot, you have the option to file jointly or separately. Filing jointly often results in lower taxes because of the increased standard deduction and eligibility for tax credits.
For example, Sarah and Mark got married this year. When they filed jointly, they qualified for a $25,100 standard deduction (compared to $12,550 if filing separately), which lowered their taxable income and resulted in a higher refund. Additionally, filing jointly allows them to take advantage of credits like the Child Tax Credit if they have children.
💡 Actionable Takeaway:
If you’ve recently married, update your tax withholding with your employer to avoid surprises at tax time. Check IRS Form W-4 to adjust your withholding based on your new marital status.
A new baby is one of the most exciting life events, and it also has a big impact on your tax refund. The IRS offers a variety of benefits for families, such as the Child Tax Credit, which can provide up to $2,000 per qualifying child. If your baby was born in 2024, you could potentially claim the Child Tax Credit when filing your 2024 taxes.
Moreover, you may qualify for additional credits like the Dependent Care Credit if you pay for childcare. These credits can reduce the amount of tax you owe and increase your refund.
Take Emily, for example. She welcomed her first child this year, and when she filed her taxes, she was able to claim the Child Tax Credit and Dependent Care Credit. These credits helped boost her refund by $3,500.
💡 Actionable Takeaway:
Start gathering documents related to your child's expenses, such as daycare receipts, medical records, and proof of care. This will ensure you don’t miss out on important credits when filing your tax return.
Purchasing your first home is a significant financial milestone, and it brings tax benefits that can increase your refund. The biggest advantage is the ability to deduct mortgage interest, which can be substantial in the early years of your mortgage. If you're a first-time homebuyer, you may also qualify for a First-Time Homebuyer Credit in some states.
Let’s say you bought a house in 2024. You could deduct mortgage interest (often several thousand dollars) on your tax return, lowering your taxable income and increasing your refund.
💡 Actionable Takeaway:
Keep track of mortgage payments and property taxes to ensure you take full advantage of the deductions available to homeowners.
Changing jobs or starting a new business can significantly affect your tax situation. When you change jobs, ensure that your new employer is withholding the correct amount of taxes. Otherwise, you might owe a large amount at the end of the year, instead of getting a refund.
For those starting a business, there are deductions available for business expenses like home office costs, equipment, and supplies. These deductions can lower your taxable income, potentially increasing your refund.
💡 Actionable Takeaway:
Update your W-4 form after changing jobs, and keep records of any self-employment expenses you want to deduct.
Divorce is another major life event that can affect your taxes. If you’ve recently gone through a divorce, you’ll need to decide whether to file as “single” or “head of household.” The latter may offer a higher standard deduction, but only if you have qualifying dependents.
Additionally, if your ex-spouse was responsible for certain deductions, such as medical expenses or child-related credits, you may be able to claim them after the divorce.
💡 Actionable Takeaway:
Review your filing status after a divorce and make sure you understand who gets to claim any dependent children or tax credits.
Moving from one state to another can impact your tax refund. Some states have lower income tax rates or no income tax at all, which can affect the amount you owe at tax time. Also, if you move for work, you may be able to deduct moving expenses.
For example, if you moved from a high-tax state like California to a low-tax state like Texas, you could see a reduction in your state taxes, which could lead to a larger refund.
💡 Actionable Takeaway:
Make sure to report your new state of residence on your tax return, and explore any available deductions for moving expenses.
Retirement contributions, such as those made to a 401(k) or IRA, can reduce your taxable income and increase your refund. These contributions lower your income for tax purposes, meaning you may owe less or receive a larger refund.
For example, Jack decided to max out his 401(k) contributions in 2024. By contributing $19,500, he lowered his taxable income by that amount, leading to a refund that was $2,000 higher than previous years.
💡 Actionable Takeaway:
Consider maximizing your retirement contributions to reduce your taxable income and increase your refund.
Life changes like marriage, having a baby, buying a home, changing jobs, or moving to a new state can all have a significant impact on your tax refund. Understanding how these events affect your tax situation can help you make informed decisions and ensure you’re maximizing your refund.
If you’ve experienced any of these life changes in the past year, take the time to review your tax situation and make adjustments as needed. Whether it’s updating your withholding or claiming new credits, these small steps can lead to big financial benefits.
Consider consulting a tax professional who can help you navigate these changes and ensure you're making the most of available deductions and credits.
Getting married can allow you to file jointly, which typically offers a larger standard deduction and eligibility for additional tax credits, resulting in a higher refund.
Yes! If you had a baby during the year, you can claim them for the Child Tax Credit, which could increase your tax refund. Be sure to report the birth to the IRS when filing your taxes.
Yes, homeowners can deduct mortgage interest and property taxes if they itemize deductions, which can lower taxable income and increase your refund.
Self-employed individuals can deduct business-related expenses like home office costs, supplies, and equipment, which can lower taxable income and potentially increase your refund.
Moving to a new state can impact your taxes, especially if you relocate to a state with no income tax or lower tax rates, potentially increasing your refund. Keep track of moving expenses if they’re related to work, as these may be deductible.
Being audited is comparable to being struck by lightning. You don't want to practice pole vaulting in a thunderstorm just because it's unlikely. Making sure your books are accurate and your taxes are filed on time is one of the best ways to keep your head down during tax season. Check out Vincere's take on tax season!
This post is just for informational purposes and is not meant to be legal, business, or tax advice. Regarding the matters discussed in this post, each individual should consult his or her own attorney, business advisor, or tax advisor. Vincere accepts no responsibility for actions taken in reliance on the information contained in this document.
For business tax planning articles, our tax resources provides valuable insights into how you can reduce your tax liability now, and in the future.
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