12 Ways to Save on Taxes Through Life’s Transitions

Tax Deductions and Credits twinbabies

Although taxes haven’t advanced to the point the Beatles envisioned when they said that if you take a walk they’ll tax your feet, like it or not, taxes are a part of almost everything we do in life. There are, however, ways to save on your taxes through life’s transitions. Here are 12 tax tips to help you save through major life events.

Education

  1. Deduct your tuition. Education expenses may be tax deductible if they maintain or improve skills required in your employment.
  2. Invest in a 529 plan to save for your children’s education. You won’t get a tax deduction, but there won’t be a tax on the earnings and growth of those funds if they are used for education.
  3. Tally the cost of books and supplies purchased for your education. Expenses directly related to your college education may be tax-deductible and may put more money back in your pocket.

The Working World

  1. Invest in 401(k)s and IRAs as soon as possible. Small contributions growing from an early age are more valuable than large contributions made years later.
  2. Learn about your company’s fringe benefits, such as tuition assistance plans, free employee counseling, mass transit commuting assistance, Medical Savings Accounts and other tax-free perks.
  3. Get next year’s refund now by adjusting your withholding so that you break even with the IRS at the end of the year. If you need help saving, have money automatically deposited to savings from each paycheck.
  4. Only borrow from your 401(k) in an emergency. The interest you pay on the loan won’t be tax deductible, and you will lose the capital appreciation you’d enjoy if you’d left it invested in the plan.

Family Life

  1. Put tax-free money into your employer’s dependent care plan. Though this will reduce your child and dependent care credit, it’s still a good financial move for most taxpayers.
  2. Claim the Child Tax Credit on your taxes. It is an additional $2,000 credit you may be able to claim for each of your dependent children under 17. Married couples with income up to $400,000, and a single parent with income up to $200,000 may be eligible for the tax credit. TurboTax will ask you questions about your dependents and give you the deductions and credits related to your dependents that you’re eligible for.
  3. Gather your receipts for dependent care. You may be able to claim the Child and Dependent Care Credit even if you don’t work, if your spouse works and you are a full-time student or disabled. Don’t overlook expenses eligible for the child and dependent care credit such as nursery school, private kindergarten, after school programs, and daycare.
  4. File jointly. Married couples filing separately are barred from many tax deductions and credits, so unless you are trying to distance yourself from a tax evading spouse or a soon-to-be-ex, a joint tax return is your best move. TurboTax helps you select the filing status that you are eligible for based on your entries.
  5. Take advantage of the Other Dependent Credit for non-child dependents. If you take care of a non-child dependent like a parent, grandparent or even a friend you may be able to claim the new Other Dependent Credit that is $500 per eligible dependent.

TurboTax will ask you simple questions about your life events when you file your taxes and will give you the tax deductions and credits you’re eligible for based on your answers. If you have questions, you can connect live via one-way video to a TurboTax Live CPA or Enrolled Agent and get your tax questions answered. TurboTax Live CPAs and Enrolled Agents are available in English and Spanish and can also review sign and file your tax return.

Comments (289) Leave your comment

  1. I have helped my dad with food, bills, and day to day items. He is currently on SSI can I still claim him as a dependent or can he file taxes himself he only makes $700 a month. Which would be the better way to go?

    1. If you take care of more than 50% of your dad’s expenses you may claim him, however, $700 per month may be close. There are many variables in determining support. Does he live in your home? It really comes down to that percentage, only you know what that is.

    1. in claiming moving expenses you must have moved more that 50 miles from your job and you must be working within one year of the move to qualify. Moving expenses include mileage (calculated at a different rate than standard mileage), storage fees, hotel expense, moving supplies expense, etc. You are not able to include meals. There is no way to figure what your return will be based on the moving expense information alone that was provided. In order to get a refund, you must have earned income during the year. You didn’t state whether or not your move was work related.

  2. I bought a new house in april 2013, can I claim expenses? Also I have a 24yr. old son who lives with me who is unemployed and who is a fulltime student so I pay for all his expenses can I claim him on my taxes?

    1. This is the last year that you are able to claim your son as a student/dependent. I recommend filing 1040Xs for the Tax Years 2010, 2011 and 2012 to receive potential credit/additional refunds if the situation was identical in those years. Your son will be eligible to file for earned income credit once her turns 25, and if his income does not exceed the maximum allowed in 2015.

      As for your home, deductible expenses include mortgage interest paid, real estate transaction fees & loan origination fees, insurance; state/county taxes, and energy saving improvements to the property. I have noticed that some recent mortgages do not provide much advantage for homeowners, with interest and principal payments being roughly equal.

      Additionally, if your move exceed 50 miles from your job or included a job change you may be entitled to deduct moving expenses.

  3. I had a baby in Dec 2012 and I haven’t worked for 2013. I did recieve unemployment for some of the year. My boyfriend and I live together, would he be able to claim me on his taxes or can we file together?

    1. Claiming Your Child:
      Technically, you should always be the one to claim your own child. Do you receive child support?
      Filing Status:
      You and your boyfriend cannot claim joint filing status unless you are legally married,

      Income:
      Unemployment is income. Since you had income for the year, you would want to file for any Federal or State Tax withheld, claim earned income credit; claim your child. Alot really depends on how much income you received. If your income is too low to plausibly support you and your child, then you and your child should be his dependent, relationship “none.” His filing status would then be Head of Household, claiming two dependents. If you are unemployed, of course any expense to find work (mileage, resume writing and duplication, out of town travel expense) is tax deductible. Likewise, childcare costs incurred while looking for work are deductible, however continual childcare over the course of the year would not be, since it is presumed that you would take care of your own child when not actively looking for work.
      If you had taxes withheld from your unemployment and you agree to be a dependent on his tax return, you may still file a tax return. Your filing status would be single, and you would be filing just in order to recoup the Federal or State taxes withheld in the form of a refund. If your child is claimed as a dependent on his return, your child cannot be double claimed on your return. You can work out the various scenarios to see which is the most advantageous to your situation.

  4. Hi I just got married last year in august. Iam a Us citizen not working and my husband is not a citizen and works gets paid cash. We have 3 kids I wil b getting taxes because I worked 3 months in 2013 what can I do, should I only file those months?

  5. I got divorced this year and have filed jointly on turbo tax in the past. Do I just start a new account with turbo tax or pull up the old joint account and somehow explain from there that I am filing single now

  6. My husband I file married filing jointly. Recently I tried to applying or the public service student loan forgiveness since I’m a teacher. I don’t qualify for the teacher loan forgiveness. I was told by federal student loans that since I filed jointly, I can afford to pay 1184.83 a month on my student loan, I currently pay 600.00 and can’t afford that. Someone told me I should file married filing signally so that my husbands income isn’t considered when I reapply for the public service student loan forgives again. What would be my advantages and disadvantages of doing this and would it help me get the loan forgiveness? We do have 1 child and are homeowners

  7. Last year I needed to support my 36 year old daughter. She went through a divorce and during this time had been unemployed. She was forced to go through a short sale of her house. During this terrible time, I withdrew all my monies that I had received as “compensation” to retire…. Therefore all last year I supported her (and my 14 year old grandson) with food, mortgage, and life necessities, thereby having had no enjoyment whatsoever of this $ gift given to me as a retirement incentive (but taxes that I now have to pay–because of this necessary withdrawal– has now skyrocketed out of control for ME. I now need help myself….!!! and and afraid I will be unable to ever pay back taxes that have accumulated.

    1. Check to see if you can claim your family as dependence big cause you paid 50% of there keep & support on your taxes check with a tax person good luck

      1. Hi Jackie,
        Congratulations on your baby. Yes, you would be able to deduct your baby. Just make sure your baby has a social security number, which you need to have to in order to claim your baby and take tax deductions and credits related to them.
        Thank you,
        Lisa Greene-Lewis

    1. I’m very sorry to hear about your wife. While Funeral Expenses are not deductible, all Medical Expenses associated with your wife’s accident are 100% deductible, including mileage to the doctors’ offices and/or hospital.
      If you didn’t already know, your filing status for Tax Year 2013 would be “Married Filing Jointly.” If you have children, you would file as a Widower for 2014 and 2015, which gives you the same tax filing benefits as if you were still married. Your 2016 filing status would be either Head of Household if you have dependents and/or children, or Single if you are unmarried without dependents and/or children.

  8. I have a ? Could dependent care be wrote off on 2012 too.also my husband and I were separated but when I was going to amend my taxes to jointly it didn’t change my refund.my other ? Is if I didn’t claim him last yr can I claim him this yr he past away in 2013 and would it help me.

    1. Hi Robin,
      Here are answers to your questions:
      1. Yes, you could deduct dependent care in 2012.
      2. Regarding amending as a joint couple, sometimes depending on married couple’s incomes you may not see a big difference(for instance if both have high incomes). By filing jointly though you would be eligible to deduct the dependent care credit depending on your income. Also note, that the refund amount shown on your amended tax return is in addition to that already received if you did receive one.
      3. You can’t claim a spouse as a dependent, but yes you may be able to file with him in 2013 and receive an exemption for him.
      Thank you,
      Lisa Greene-Lewis

    2. The only issue that might come up would be your spouse’s signature for past year amended joint return filings. You might want to attach a certificate of death to keep the IRS from rejecting the return with only one signature.

  9. I got married this year in July. My husband never gets his taxes back because he owes Child Support. Should I file Married but seperate so that the money I get from IRS goes to me? I don’t want my hard earned money to go to the Child Support that he owes. What is the best filing status for me to use for 2013?

    1. No, only ever file Married Filing Jointly. It is always more advantageous and certain credits are disallowed for Married Filing Separately. Only in cases of legal separation or physical separation where children are involved would you ever file Married Filing Separately or Head of Household, respectively.
      Use the Injured Spouse form to protect your portion of earnings and commensurate refund.

  10. My 20-year-old son lived with me until he enlisted in the Air Force at the end of May. He did not work or go to school from January until he left. Can I claim him as a dependent and still have him file his own taxes on his military income from June through December? He did come back and stay with me for a total of 4 weeks of leave during November and December, so he was living with me for 6 months and not paying for anything.

    1. No unless he was enrolled in a higher education institution most of the year because he’s 20. You could claim him as a qualifying relative but then he would have to have income of 3,900 or less for the year. If he joined the military, I think his earnings would go above that.

    2. You can claim him as a dependent under the category of “qualifying relative,” but not as a qualifying child because he was not a full-time student and is older than 17/18/19 (different age limitations for different possible credits).

      He can file so that his Federal Withholding will be returned as a refund, however he must state that he may be claimed as a dependent by someone else.

  11. My question is. I drive right at 98.6 miles for work every day. Is there a deduction for this and any other expenses related to my car usage.
    Thx.

    1. State registration fees minus taxes are deductible on all vehicles on a Schedule A.

      Without knowing more details, here are some possible scenarios:

      Job 1 to Job 2 mileage is tax deductible, should you happen to work at another job before you drive to work at the job mentioned.

      If you are a 1099 employee, all expenses may be deductible.

      If you have a small business, LLC or Corporation and depending on the type of work you do, the car may be entered as a fixture of the business and depreciated over the years; repairs, insurance, mileage, tolls, parking tickets, registration fees, etc are deductible.

  12. we purchased energy efficient windows in December and paid in December however due to a weather issue, they couldn’t install them until 1/4/14. Are these windows still eligible for tax deduction and does the install date matter or just when it was paid.

  13. I’m divorce, but I still paying for my exWife education(she is unemployed), Can I claim those costs on my return?

    1. While it’s very nice of you, I don’t see how you could unless you had a corporation or small business, made her an employee then claimed that the expense of the education was vital to her job. She may be able to claim the Lifetime Learning Credit, but has not wages to claim against …. unless she is receiving Unemployment income?

  14. I also paid off some bills for her totaling around $4,000.00 so she could qualify for a home loan. Is there anyway I can claim that?

  15. My daughter is receiving a disability check and lived with me until the end of October. I paid all house payments and utilities. She did pay her cable, jnternet, and house phone. Can I claim her on my 2013 taxes?

  16. Hi, I was renting a house that was caught in a flood last year. I did not have renters insurance and lost all my furniture, household items, some electronics, and most personal belongings as well as my vehicle (also not insured for floods). I’ve had to replace almost everything out of pocket. What kind of tax credit can I claim?

  17. My son left for college may 2013, he uses my income for his FFSA pell, his grandfather pays is rent on campus, and his books for his first semester. How do I claim him on my taxes without cheating grampa’s help

    1. You need to first determine if his g’father is claiming educational expenses which are typically granted to parents.

      If so, remember that no one has a greater right to claim a child than the parent.

      If your child is 24 or younger, you may claim him as your child.

  18. I moved to Oklahoma just over a year ago from Texas so I now live in Oklahoma but my employer has remained the same in Texas. In order to do this I now work remotely over 90% of the time out of my home. Texas does not require state taxes and since I work there t is not taken from my pay. Oklahoma however does. Am I required to pay Oklahoma state take if I work in Texas but live in Oklahoma?

    1. Hobby Income in excess of $600 per annum must be disclosed.

      If you mean to say that you want to deduct that cost of creating and maintaining your business website, small businesses are typically allowed to claim up to 100% losses in the first two years of business.

  19. My husband had a brain hemmoraghe in May and needed 24/7 care. Can I deduct the cash payments that I made for different caregivers that I hired to help me care for him so that I could get some sleep. It lasted for 3 months and I paid out in the area of $15,000 . Medicare does not cover any of this. Thank you.

    1. Make sure to contact each of those providers and have them give you receipts for the cash payments that were received. Or, using a receipt book, you can make out receipts for the sum total given to each provider and have them sign and, if possible, stamp the receipt with their business name, if available.

  20. This past year i have a had a lot of medical expenses. Instead of jaw surgery they are trying invisalign (which isn’t covered since i had braces 5 years ago) This cost me over 6000.00 plus office visits. Insurance only covered like one visit. Am i able to write this off? And the rest of what insurance didn’t cover? Im over 10 grand this past year.

    1. Since it is a remedy en lieu of surgery
      I would include this expense as well as prescriptions, copays, out of pocket expenses and all round-trip mileage to doctors’ offices/ hospitals/therapists.

  21. I HAVE NOT FILED MY GEORGIA STATE TAX RETURN YET, HOW SHOULD I DO THIS? SHOULD I JUST FILE THEM. I HAVE THEM FILLED OUT. I HAVE MOVED AND REALIZED WHEN I GOT EVERYTHING OUT THIS YEAR I NEVER SENT IT IN. I OWED $8.00 AND NOT SURE WHAT TO DO

  22. hello i had a baby in 2013 i worked pt up till may 2013 im also getting soc.sec. can i claim my new babyif so up to how many kids can i claim?also my daughter moved back home from college she in sophmore yr can i claim her she 19yrs old are ther deductions to claim for buying a vehicle last year?

    1. Hi,
      Congratulations on your baby. You can claim your baby just make sure you have a social security number for him or her. There’s no limit to how many kids you can claim as long as they meet the test to be claimed as a dependent. You can claim your daughter that’s in college as long as she didn’t provide more than half of her own support.
      Thank you,
      Lisa Greene-Lewis

  23. hi I have two babies and I was wondering whats the most money you can make for the year to get the earned income tax credit…thanks

  24. my husband and i have been living apart since june 5th. am i ble to file head of household. I do not know his social security number and there is a 5 yr restraining order therefore there is no communication between us

    1. In order to file as Head of Household, there must be household members besides you, meaning children or dependents.

      If that is the case, then yes, you may file as Head of Household.if the children or dependents lived with you in 2013 even one day more than with your spouse.

      If there are no children or dependents, then you would file as Married Filing Separately, which is the least possible favorable filing status.

      I would imagine that at some point a formalized divorce would be in order. In place of that, a formalized separation would be a good idea.

  25. My girlfriend and i live together, both our names are on the lease. She has no income other than footsteps, so i pay all the bills. Can i claim her as a dependent?

    1. Yes, you are taking care of more than 50% of her support. You could file as Head of Household, she is your dependent, with relationship = none. You are not blood-related, we presume?

  26. My mom is receiving Medicaid in a nursing home. Her S.Security and pension monthly does not pay the entire cost and I have to pay about $200 a month to cover her costs. Plus I have to pay for personal care items and use alot of gas traveling. Can I claim her as a dependent? Thanks.

  27. I am on social security disability and I was wondering if I should claim my son or my gf should my income is higher than hers for 2013 also we both pay child support can we both get the tax credit for that as well

  28. I got married in February of 2013 and my husband only worked a couple of months and we have two children can I still file hoh if we file jointly

    1. Do not confuse the psychological aspect of feeling that you’re doing it all on your own because your husband isn’t working with the fact that you are legally married. You will have a higher standard deduction if you file Married Filing Jointly. This will reduce your earnings to a greater extent than if you file Head of Household and, hopefully, will get you a larger refund as a result. Head of Household is typically applied to single-parent scenarios, or those with dependent relatives. Your husband, whether working or not, is still your husband, and the IRS supports your legal union through a higher standard deduction and credits that people who are Married Filing Separately will never get.

  29. My wife and I are still legally married and currently living together but filing for a divorce. She has a part time job and purchased a house and going to school. I have a full time and a part time job we also have a 7 year old. She we still file as married or separately.?

    1. Married Filing Jointly will always give you the best possible return. You are entitled to the standard deduction for married couples, plus your standard deduction for your child, as well as child care expenses, if any. Additionally, you may be entitled to Earned Income Credit (EIC) and Additional Child Tax Credit. You are also entitled to the Lifetime Learning Credit or Standard Education Credit for your wife’s school, depending on if she is pursuing an undergraduate degree or continuing education, From the purchase of the home, all loan origination fees, interest, state/county taxes are deductible.

      Married Filing Separately is the least advantageous filling status as many possible credits are excluded for this status.

  30. Can my boyfriend clame me even thow i havent worked or made over 10,000 but supported me all year and am try to get ssi

    1. I worked this yr.2013 and made 24,600.I also collected my social security retirement funds 25.000. do I file taxes?Im seperated from my wife for 3yrs.and we live seperatly.what do I do?this is the first yr. i worked since i retired

  31. Can i clame my boyfriend if ive taken care of him and hasnt workec even thou i may have barly made 3000 yhis year

    1. The IRS can do the math on a $3,000 income for two people over the course of one year. Your tax filing will likely be rejected. Whether or not you are trying to get SSI, the only income that matters is what actually comes through the door into your home. Pending issues are not considered. If he provided 100% of your support, he can claim you as a dependent, relationship = none. He becomes Head of Household by virtue of you being his dependent and files as such.

  32. We have recently purchased a new house and used money from our 401k for the downpayment. What forms do we need to receive before we file our taxes?
    We also were wondering how we can go about filing our medical bills for the past year.

    1. Medical bills, mileage to doctors’ offices and hospitals, prescriptions are all deductible on a Schedule A.

      The withdrawal from your 401k may exclude you from taking the Saver’s Credit this year.

      You should expect to receive a disbursement 1099-R.

      Other Info that may be helpful:

      Exceptions for Early Distributions from a Qualified Retirement Plan such as a 401(k) or 403(b) plan:

      Distributions upon the death or disability of the plan participant.
      You were age 55 or over and you retired or left your job.
      You received the distribution as part of “substantially equal payments” over your lifetime.
      You paid for medical expenses exceeding 7.5% of your adjusted gross income.**
      The distributions were required by a divorce decree or separation agreement (“qualified domestic relations court order”),

      * The home-buying exception has the following additional criteria: you did not own a home in the previous two-years, and only $10,0000 of the retirement distribution qualifies to avoid the tax penalty.

      ** You do not need to itemize in order to claim the medical expense exception.

      If the exception is properly coded in box 7 of your 1099-R form, you do not need to fill out Form 5329. If an exception applies and is not recorded in box 7, then you need to fill out Form 5329.

      1099-R Box 7 Distribution Codes
      The following is a list of distribution codes that may appear in box 7 for Form 1099-R to report distributions from a retirement account. This list is taken from Instructions for Forms 1099-R & 5498 (PDF).
      Distribution Codes for 1099-R Box 7
      Distribution Code Meaning
      1 Early distribution, no known exception
      2 Early distribution, exception applies
      3 Disability
      4 Death
      5 Prohibited transaction
      6 Section 1035 exchange
      7 Normal distribution
      8 Excess contribution
      9 Cost of life insurance protection
      A May be eligible for 10-year tax option
      D Excess contribution
      E Excess annual additions
      F Charitable gift annuity
      G Direct rollover
      J Early distribution from Roth IRA
      L Loans treated as deemed distributions
      N Recharacterized IRA contribution
      P Excess contribution
      Q Qualified distribution from a Roth IRA
      R Recharacterized IRA contribution
      S Early distribution from a SIMPLE IRA in the first two years, no known exception
      T Roth IRA distribution, exception applies
      Previous

      1
      2

      Next
      Federal Tax Forms for the Early Distribution Penalty

      Form 5329 (PDF)
      Instructions for Form 5329 (PDF)

  33. I moved du to being transferred with the company i work for . This was cross country and I have spent over 4000 dollars of my money for this move. What can I calim?

    1. Everything … except meals!

      Moving Expenses include storage fees, truck rental, mover’s expense, hotel stays, flight expense, and mileage as calculated specifically for moving expense.

      You may want to subtract meals and detail all other expenses for your records.

  34. Hi, I am a legal alien working in USA. I am working on L1B Visa. I am the only earner in my home. I have wife with me in USA, but she is a home maker. we had a baby in 2012 November. but i dont remember i have updated my withholdings or not. Please suggest me what to check in W2 about exclusions. In short, I am the only earning in my home – have a wife and a kid. so what will be my exclusions?

    1. The American Opportunity credit is available only for the first four years of post-secondary education and is partially refundable. The student must be enrolled at least half-time.

      The Lifetime Learning Credit is a tax credit for any person who takes college classes. It provides a tax credit of 20% of tuition expenses, with a maximum of $2,000 in tax credits on the first $10,000 of college tuition expenses. You can claim the Lifetime Learning Credit on your tax return if you, your spouse, or your dependents are enrolled at an eligible educational institution and you were responsible for paying college expenses. Unlike the American Opportunity credit, you need not be in the first four years of undergraduate classes. Even if you took only one class, you may take advantage of the Lifetime Learning Credit.

      Use Form 1098-T

      Remember: No felony drug convictions!

  35. My 28 year old girlfriend lives with me. She’s been unemployed all year. She has also lived with me all year. Can I file her as my dependent?

    1. Yes, you would count her as a dependent since you paid for all of her living expenses.
      That would make your filing status Head of Household with one dependent, relationship = “none”

  36. My daughter moved out of the house in March and back home in September. She works but doesn’t pay any expenses. Can I claim her on my taxes?

  37. Help! My boyfriend and i have a son together we’re not married yet but he takes care of me financially and i work part time..can he claim me as a dependent??

  38. I started drawing my Social Security in 2013. My wife draws a MS State Retirement from her work now that she is retired and I receive a monthly check from IRA’s that I have with Edward Jones. Are any of these items MS State Taxable? I’m 65 years old.

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