BY SUSANNAH MCQUITTY (all rights reserved)
If 2017 was as crazy for you as it was for the rest of the internet, chances are you ran into a tax-changing event or two (they’re like life-changing events, just with taxes. Woo!).
Some events affect your taxes in more obvious ways than others. You might guess that getting married is going to affect your tax return, but opening a retirement savings account? That’s a bit more surprising.
At a glance, here are five life events that affect your tax situation and how.
Starting a side hustle
Did you open an online shop, rack up your freelance writing, or sell those handmade goodies at a town festival this year? Good for you! But how does that affect your taxes exactly?
Earned income from freelance work is handled a bit differently on your tax return than income reported on a W-2. Almost everything related to your business ventures will be headed for a Schedule C, and a good bit of that info will come from your own records instead of mailed-in forms. Check out our blog post on taxes for freelancers for a complete rundown.
Saving for retirement
Opening a savings account for retirement whether it’s an IRA, Roth IRA, or 401k is another big life step that you’ll need to keep in mind when you file your taxes this year. You may qualify for the Saver’s Credit, which helps offset the first $2,000 voluntarily contributed to personal retirement accounts or workplace retirement programs. Also, your IRA contributions may be tax-deductible, which can help reduce your taxable income.
Different retirement accounts have different rules for taxes. Some will not be taxed until you withdraw your savings, and others are taxed on the front end when you make the contribution. Understanding your retirement account can help you save on taxes while you save up for those golden years.
Our thoughts and prayers are with everyone affected by the 2017 natural disasters. The IRS provides some tax relief in the wake of these events to help taxpayers who are in the process of recovery.
If you were a victim of hurricanes Irma, Maria, or Harvey, or were affected by the wildfires in California, check out the tax relief in disaster situations page on the IRS site.
Marriage and divorce
Get married in 2017? Now’s the time to sit down with your spouse and decide whether to file jointly or separately (it’s usually a better deal to file jointly, but that depends on your financial situation).
If you were divorced in 2017, you can file as single or if you can claim at least one qualified dependent as head of household. You and your former spouse cannot claim the same dependent, however, so you must determine who will claim any dependents for the year.
You should also notify the Social Security Administration (SSA) if you changed your name, whether you were married or divorced. If the name you file with doesn’t match the name associated with your Social Security Number, your tax return will be rejected.
Having a baby
Good news for new parents! With all the joys (and?ahem?life changes) that come with having a child, you’re also going to be saving money on your taxes. From the Child Tax Credit to the additional personal exemption and the Child and Dependent Care Tax Credit, you can take advantage of several new tax breaks.
Did we miss anything? Comment below with a big life change or event that happened to you in 2017, and we’ll let you know if it affects your taxes!