Experiencing significant life milestones like getting married recently or buying your first home can lead to a myriad of uncertainties and inquiries. While you may be pondering how these pivotal moments impact your financial situation, rest assured that they can also yield tax savings opportunities.
Embarking on the journey of marriage, becoming a homeowner, welcoming a new addition to the family – these pivotal milestones have the potential to bring about tax savings when the time comes for tax filing.
Getting Married
If you have recently tied the knot or are contemplating marriage this year, chances are you are aware of the significant financial commitment involved. Despite the hefty price tag associated with weddings, one silver lining of getting married is the potential for increased tax benefits compared to when you were unmarried.
With marriage joining your lives, you and your partner can now combine your tax returns under the status of married filing jointly. This status may result in decreased tax obligations compared to when you were filing individually, thanks to the more favorable federal tax rates provided to married couples filing jointly.
In many cases, married individuals can enjoy tax benefits. If a couple ties the knot on the last day of the year, they are deemed married for the entire year and can take advantage of the various perks that come with marriage.
Choosing to file jointly as a married couple opens the door to potentially increased tax deductions and tax credits. One notable enhancement is the larger standard deduction available for the 2024 tax year.
In the upcoming tax year, individuals filing as single will see a boost in the standard deduction to $14,600, while those filing jointly as married will enjoy an increased deduction of $29,200. Moreover, married couples filing jointly in 2024 can benefit from an EITC (Earned Income Tax Credit) of up to $7,830 with three children.
Buying a New Home
Making the decision to become a homeowner brings about significant life changes and presents an opportunity for substantial tax savings. The costs associated with a mortgage and property taxes can be quite substantial. Still, for those who have recently bought a home or are contemplating the idea, there is potential to lower tax liabilities by deducting mortgage interest and property taxes when itemizing deductions on Schedule A.
Having a Child or Children
If you welcomed a new member to your family this past year, I extend my warm congratulations! Amidst the happiness and thrill that comes with having a child, you might now be contemplating the financial aspects of caring for your little one.
Great news! Your family can now take advantage of additional tax deductions and tax credits. When you welcome a new baby, you become eligible for various tax benefits, such as the Child Tax Credit and the Child and Dependent Care Credit if you incur child care expenses.
Child Tax Credit:
- Each dependent or a child must be under 17
- Up to $2,000 for the tax years from 2022 to 2025
- If you are a single filer with an income of $200,000 or less or a married couple filing jointly with a combined income of $400,000 or less, you may be eligible for the Child Tax Credit.
Child and Dependent Care Tax Credit:
When considering tax credits for childcare expenses, you may qualify for a tax credit of up to 35% of eligible expenses. This Child Care Tax Credit applies to up to $3,000 of expenses for one child or $6,000 for two or more children.
Once your adjusted gross income surpasses $15,000, the tax credit begins to decrease, dropping to a minimum of 20% instead of the usual 35%. This adjustment highlights how welcoming a new addition to the family can lead to a significant tax benefit.
Experiencing life transitions can evoke a mix of emotions, from excitement and hope to confusion and costliness. However, amidst the whirlwind, it’s worth noting that these transitions often come with significant tax advantages.
Rest assured that you don’t need to stress about understanding the intricate tax regulations. Regardless of the financial decisions you made in the past year, the experts at Rapid Tax dedicated Tax Professional will ensure that they are accurately reflected in your tax filing. Whether you prefer to handle your taxes independently or have one of our seasoned professionals assist you, we are committed to maximizing your refund and ensuring you receive every entitlement you are due, which is guaranteed.
