How Changes in Your Life Can Save You Money

Whether you got married last year or purchased your first home, changes experienced in your life can bring about many questions and uncertainties. Although you may have questions about how life events affect your finances, one thing is certain, your, what might seem crazy, ever-changing life can save you money on your taxes.

Did you get married last year? Purchase your dream home? Have a baby? Or have another life change?

Don’t worry, we have you covered

Check out just a sample of big life events that could save you money at tax time and how we can help you.

Getting married

Did you get married this year, or are you considering it? We know weddings cost a bundle and can really set you back, but one perk of getting married is that you could now see some bigger tax benefits than when you were single.

Now that you’ve tied the knot, you and your loved one can now file your taxes as married filing jointly and may see lower tax liability than when you were single. This is because there are lower federal tax rates for couples who file married filing jointly compared to filing as single. Most married couples will see tax savings or a “marriage bonus”.

You may also see bigger tax deductions and credits now that you can file as married filing jointly. For example, there’s a bigger standard deduction for tax year 2022. The standard deduction increased to $12,950 if you are filing as single and $25,900 married filing jointly. Also, for 2022 the Earned Income Tax Credit is up to $6,935 with three kids if you are married filing jointly. Even if you were married on December 31 of last year, you are considered married all year and can reap the rewards of being married.

Buying a new home

Homeownership is a big and rewarding life change that is also one of the biggest tax savings people see. Your mortgage and property taxes can really break the bank, but if you purchased a home this year or you are considering it, you can deduct your home mortgage interest and property taxes.

Having a baby

Did you have a baby last year? If so, congratulations on your new addition to the family! Combined with all the joy and excitement a child brings, you may be trying to figure out how you’re going to pay the costs of supporting your baby.

Well, fortunately, your family is now eligible for new tax deductions and credits as well. Some of the tax benefits you will receive for having a baby are the Child Tax Credit and Child and Dependent Care Credit. The increased credit is a benefit to new parents.  

Tax Year 2021

In 2021 (the taxes you file in 2022) the Child Tax Credit increased from $2,000 to: 

• Up to $3,600 for each qualifying child under 6 
• Up to $3,000 for each qualifying child age 6 to 17

This was the first time that families with children age 17 were  eligible for this credit.

Also, for the 2021 tax year only, the Child and Dependent Care Credit expanded in several ways. The percentage and the child care expense thresholds expanded, so you can get a credit up to 50% of $8,000 ($4,000) in child care expenses for one child under 13 and up to 50% of $16,000 in expenses ($8,000) for families with two or more dependents. For your 2021 tax return this credit was refundable if you lived in the U.S. more than half the year. That means even if you didn’t owe any taxes, you may have still been able to get all of the credit in the form of a refund.

Tax Year 2022 

In March of 2021 the American Rescue Plan was signed into law to provide financial relief for millions of Americans. However, some of these benefits have reverted back to what they were before the American Rescue Plan or will expire. The Child Tax Credit and the Child and Dependent Care Credit are two tax credits that will revert back to their pre-2021 provisions. For tax year 2022 (the taxes you file in 2023) the provisions change back to: 

Child Tax Credit: 

• Reverts back to up to $2,000 for 2022 – 2025

• Each dependent child must be under 17

• Refundable up to $1,400, but no longer fully refundable

• Advance payments were not issued for tax year 2022 

• The credit is available if you earn up to $200,000 as a single filer and up to $400,000 if you are married filing jointly.            

Child and Dependent Care Credit: 

• Up to 35% of $3,000 ($1,050) of child care expenses for a dependent child under 13, an incapacitated spouse or parent, or another dependent so that you can work or look for work. If you have two or more dependents, the credit will be up to 35% of $6,000 in expenses ($2,100).

The credit will be reduced at incomes over $15,000You can see why your new baby can be considered your biggest little tax deduction.

TurboTax can help you save money through life’s transitions

Life transitions may feel like many things at once: exciting, emotional, confusing, hopeful and often expensive. On the bright side, these life moments often bring big tax benefits.

Don’t worry about knowing these tax rules. You can come to TurboTax and fully hand your taxes over to a TurboTax Live tax expert available in English and Spanish and get your taxes done from start to finish.

8 responses to “How Changes in Your Life Can Save You Money”

1. 

   My daughter is 18 and attends ccbc college can I claim her as a dependent
2. 

   How would I file married filing jointly if my spouse is not a us citizen yet? My spouse also doesn’t work.
3. 

   66 yrs old divorced with a 14 yr old making 64,000.
4. 

   Do deaths/ funeral expenses fall under any tax deductions?
5. 

   How can I add an elderly parent who now lives with me.
6. 

   How is deductible a new car?
7. 

   My wife and I married on March of 2017. She is from Africa. I supported her the entire year but had no SSN for her. Obtaining an ITIN was not in the works because the paperwork filed for her Visa also included a SSA application for a SSN. I filed single because I didn’t have her SSN. Now that she is here and has a SSN am I able to file an amendment?
8. 

   My wife is currently self employed and I am retired and we pay estimated taxes each year. However, she is going to retire at the end of December. How do we get Turbo Tax to recognize that change in our taxable income for next year and reduce our estimated taxes.