Money Girl explains how big life changes often come with big tax benefits.
by Laura Adams
Big life changes often come with big tax benefits—if you remember to claim them on your tax return!
Make sure you (or your accountant) don’t overlook these 6 common life events that can cut your taxes and save money:
- Becoming self-employed: No matter if you earn money on the side or run a full-time business, you can deduct all qualifying expenses—such as office furniture, software, equipment, supplies, and advertising—against your income, which reduces your tax liability. Check out IRS Publication 535, Business Expenses for more information.
- Buying a home: The interest you pay on a mortgage (or a home equity line of credit) to buy or improve your main or second home is tax deductible. The property can be a house, condominium, cooperative, mobile home, house trailer, or boat. Get more details in IRS Publication 936, Home Mortgage Interest Deduction.
- Getting married: Married taxpayers have the option to file taxes jointly or separately. In general, filing jointly gives the lowest tax bill—but always figure taxes both ways and choose the status that saves you the most. See IRS Publication 501, Exemptions, Standard Deduction, and Filing Information for additional information.
- Becoming a parent: Having a child entitles you to a tax exemption per child—plus, a tax credit for each child under age 17. If you adopt, you may be eligible for one of the largest refundable tax credits available to taxpayers, which is up to $13,360 per eligible child. Refer to IRS Publication 929, Tax Rules for Children and Dependents.
- Going to school: If you pay education expenses—such as tuition, fees, and books—for yourself, a spouse, or a dependent child, up to $2,500 of interest paid on student loans is tax deductible. See IRS Publication 970, Tax Benefits for Education for complete details.
- Moving for a new job: Your unreimbursed moving expenses may be tax deductible if you relocate for a new job that’s at least 50 miles further away from your home than your old job. To learn which expenses qualify for a tax break, review IRS Publication 521, Moving Expenses.
There are many more life changes that qualify for tax benefits. That’s why I always recommend using a qualified tax accountant. He or she will help you claim every legitimate tax deduction and credit so you never overpay taxes and keep more of your hard-earned money.
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