Did you have a life changing event in 2012? Got married? New job? Had a baby? Bought or sold a house? You may not realize, but major life events such as these have a big impact on the way you file your taxes. Often they qualify you for many very beneficial tax savings.
Did you get married this year? Congratulations! This is a big step in your life and will also have impact on your tax return. If you got married, even on the last day of the year, your two filing options are Married Filing Jointly and Married Filing Separately. The taxes you’ll pay when filing jointly are usually lower than if you combine the taxes due on two separate returns. Filing jointly compared to filing separately also gives you access to more credits, including the Child and Dependent Care, Earned Income, and the Elderly and Disabled Credits. While Married Filing Jointly typically provides more tax benefits than filing separate returns, taxpayers are recommended to weigh the pros and cons and decide for themselves which is the best filing status.
Bought or Sold a House?
Now only has it been a great time to buy a home, the saving doesn’t stop there. If you bought a home, the interest you’re paying on your mortgage can now be counted as a deduction on your tax return. Other savings include deductions for real estate taxes and mortgage points (each point is equal to one percentage of the loan amount).
If you sold your home the amount of home-sale profit that can be tax-free can be as much as $250,000, or $500,000 if you are married. This assumes that you own the house and have lived in it for at least two of the five years prior to the sale.
Changes in your employment status can also provide tax benefits. It may qualify you for the Earned Income Credit. There are many deductible work-related expenses so long as they are “ordinary and necessary” expenses common and accepted in your trade, business or profession, or helpful in conducting a successful business practice, and not reimbursed by your employer. A few job-related deductions include: dues to professional societies, depreciation on a computer your employer requires you to use in your work, work-related education, tools and supplies used in your work, subscriptions to professional journals and trade magazines related to your work, work clothes and uniforms if required and not suitable for everyday use.
If you’re searching for or relocating for a job, those too, can qualify for tax deductions. You may qualify for job search related deductions, such as employment and outplacement agency fees, moving expenses, and travel and transportation expenses. Check the IRS Publication 529 Miscellaneous Deductions for more details on job-related expense deductions.
Had a Baby?
Congrats! The deduction for the new addition to your family is generally $3,800 per child (for 2012) claimed as a dependent. Some other tax benefits you may qualify for include: a larger Earned Income Credit, Child Tax Credit, Child and Dependent Care Tax Credit. If you aren’t married and have a child, you may qualify for the Head of Household filing status which may help your tax liability.
Some of these tax breaks require you to itemize your deductions. Others are available even if you claim the standard deduction. Naturally, there may be eligibility requirements to meet and in some cases, there will be extra worksheets, forms or schedules. And you will always need to have documentation.
Taxbrain asks you as series of questions, and then based on the answers to those questions, determines which credits or deductions are available for your situation, making the preparation of your return as painless as possible.
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