Three weeks. Yeah, that’s roughly how long until April 15. If you’ve already filed your return, don’t check out – today’s article will help you know if you need to do things differently on next year’s return.
But if you haven’t yet prepared your taxes… well, you’re like 20-25 percent of the rest of America who don’t file until the last minute.
Now I often recommend to Redding people at this point to file an extension simply because it gives you (and me) time to be thorough and not rushed by the tyranny of the deadline.
Either way, let’s get an appointment scheduled to get your return (or your extension request) filed:
And while you’re preparing things on your end, make sure you’re not forgetting to give me all of the details of your situation from this past year. A surprising amount of people will send me messages like this just as I’ve finished preparing their tax return:
To help you remember, here’s the top ten list of life change events that will change your tax return…
10 Life Change Events You Should Share with Your Redding Tax Pro
“Life is like a box of chocolates. You never know what you’re gonna get.” – Forrest Gump
You wouldn’t wait until the day of a presentation to practice your speech, would you? Yet, every year, I see clients surprised by their tax bill because they forgot to mention one or more major life change events. And I’m not talking about the government’s tax law decisions here.
Maybe you got married, had a kid, are closer to retirement, are caring for an elderly parent, etc. The point is, these kinds of things can come with new obligations, or (better yet) some open doors to reducing your tax burden.
Which means, the more I know about your life when preparing your taxes, the better I can help you with your IRS obligations.
So, let’s explore the most common life change events you should be sharing with your favorite tax pro:
1. Marriage, divorce, or even domestic partnership changes can significantly alter your filing status and potentially your eligibility for certain deductions and credits. For example, when switching from single to married filing jointly, you can end up with a tax savings of 2.5K to 5K or more depending on your income.
2. Having a baby (btw, congratulations!) or taking on the responsibility of caring for an elderly parent can open doors to tax credits like the Child Tax Credit (up to 2K per child) or the Dependent Care Credit (up to 3K per parent).
3. Whether you’re finally buying your dream home or selling an existing property, tax implications come into play. Understanding mortgage interest deductions, property tax deductions, and potential capital gains taxes is crucial.
4. Medical expenses you pay for yourself and qualified dependents (including an aging parent you claim) can be deducted. The Medical Expense Deduction can help offset some of the costs of medical care if they exceeded 7.5 percent of your AGI in 2023.
5. Over 4 million workers quit their jobs in the US just in July of 2022. This just shows how fluid work life can be. If you started a new job, got laid off, or even took on a side hustle last year, these can all impact your tax situation, whether in the form of work-related deductions or the potential for paying more taxes for self-employment.
6. If you decided to go back to school (or had a dependent do the same), the tax code offers some help. Credits like the American Opportunity Tax Credit (AOTC) (worth up to 2.5K) and the Lifetime Learning Credit (LLC) (up to 2K) can be used to offset education expenses.
However, there are limitations: you can’t claim both credits for the same student in the same year, and the AOTC is only available for the first four years of qualified education after high school. Income limitations also apply for both credits.
7. If you experience unexpected losses — like damage to your home from a natural disaster — you might be able to claim a deduction (again, there are limitations for this).
8. While inheriting assets can be a blessing, it can also come with tax consequences. While inheritance tax laws vary by state, some states have inheritance taxes that kick in at estates exceeding 1 million.
9. Paying off debt is a win, but if you settle debt for less than you owe, the forgiven amount might be considered taxable income.
10. As you transition into retirement, contributions to retirement accounts like 401(k)s or IRAs can significantly reduce your taxable income now. Plus, the money grows with tax advantages until you withdraw it in retirement.
While this is by no means an exhaustive list of life change events, this should get you in the proactive thinking mindset when it comes to your taxes. And, if by this time, you’ve already filed them, these are things to think about for this year.
By keeping me, your Shasta County tax pro, informed about your life change events, we can work together to keep you tax savvy.
So, what exciting changes are on the horizon for you? Reach out and let’s see how we can make them work to your advantage.
Staying on top of the changes,
Dennis Fritz
