Life Changes and Your Taxes

Mar 13 • Financial Planning, Life Planning • 430 Views • No Comments on Life Changes and Your Taxes

By Matt Starkey

Have you experienced any life changes in the last year?  If so, those changes may affect your tax planning. In fact, there’s hardly an aspect of your financial situation—savings, education, real estate, investments, retirement funding, or estate planning—that isn’t influenced by taxes. As you begin preparing your taxes and filling out the Form 1040, ask yourself the following four questions:

  1. Have you married or divorced in the past year? Near the top of the form you must declare your filing status (single, married filing jointly, married filing separately, or head of household), which determines your marginal tax rate (the rate at which your last dollar of income is taxed).
  1. Have you had a baby, adopted a child, or assumed caregiving responsibilities for a loved one? If so, the number of exemptions you claim, or dependents you support, may change.
  1. Have you changed jobs, started a home business, or rented out your second home? There are more than a dozen types of income that you must report, as applicable to your situation.
  1. Have you made payments on a mortgage, incurred medical expenses, or donated to charity? At the bottom of the form, you will list any deductions, which in turn reduce your total income to adjusted gross income (AGI).

The Importance of Timing

Waiting until just before April 15 to think about your taxes may prove to be costly. We recommend coordinating your tax strategies with your life changes and financial strategies.  As part of your overall planning, you may lower your tax bill while working toward a variety of short- and long-term goals, such as paying off credit card debt, buying a home, helping to pay for a child’s education, and funding your retirement.

For help with questions about your own situation, schedule a meeting by clicking below, contact Matt Starkey –mstarkey@makinglifecount.com, or call (913) 345-1881.

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