Life Stages and Tax Changes
Texas CPAs Say Certain Milestones Marked by Taxes

DALLAS — People often quote the popular saying that nothing in life is certain except for death and taxes. However, Uncle Sam doesn’t wait until the end to greet you; the tax icon is with you every step of the way.

If you’re about to experience a significant life change, like becoming a parent, Texas CPAs urge you to find out how your milestone may affect your taxes.

Marriage

If you’ve recently taken a trip to the chapel, take note. Taking a spouse’s surname must be reported to the Social Security Administration to avoid problems when filing a joint tax return under the new last name.

When it comes to filing taxes, newlyweds and not-so-newly married couples must decide whether to file separately or jointly. The filing status you can use depends in part on your marital status on the last day of your tax year. If both you and your spouse have income, Texas CPAs recommend you figure your tax on both separate and joint returns to see which gives you the lower tax.

Parenthood

Bringing home a bundle of joy brings with it a new set of tax considerations. If you have a qualifying child, you may be able to take the Child Tax Credit starting the calendar year in which your baby was born or adopted. Depending on income levels, the credit may be worth up to $1,000 per qualifying child. The Additional Child Tax Credit is a refundable credit available to those who receive less than the full amount of the Child Tax Credit.

In addition, if you pay a daycare, a nanny or another childcare provider to watch your children under age 13 while you work, you may qualify for the Child and Dependent Care Credit.

Adoptive parents may claim the Adoption Credit worth up to $10,390 for qualifying expenses paid for the adoption of an eligible child. This credit is subtracted from your tax liability and is generally allowed for the year following the year in which the expenses were paid.

To help pay tuition and related expenses for elementary, secondary and higher education at private or parochial schools or state-approved home schooling, parents may contribute to a Coverdell Education Savings Account. The contributions aren’t tax deductible, but qualified distributions are tax-free.

Divorce

Getting a divorce costs money and impacts your taxes owed. While you can’t deduct the legal and court costs to get a divorce, you may be able to deduct legal fees paid for tax advice regarding your divorce and legal fees to obtain alimony.

Fees paid to accountants, actuaries, appraisers, and other professionals for determining your correct tax or in alimony acquisition also may be deductible.

The IRS considers you unmarried for the whole year if you have a final divorce decree or separate maintenance by Dec. 31. Annulment decrees allow you to file amended returns for all tax years affected by the annulment that are not already closed by the statute of limitations.

Alimony payments from a spouse or former spouse are taxable to you in the year received. Required alimony payments to a spouse or former spouse may be deductible.

Whatever life stage you’re in or headed to next, check the IRS Web site at www.irs.gov or consult with a CPA to make sure you’re taking advantage of the tax benefits for your current life situation.
For more financial tips about various life stages, visit www.ValueYourMoney.org. While there, sign up to receive a free monthly electronic newsletter.

ABOUT TSCPA

TSCPA (http://www.tscpa.org) is a nonprofit, voluntary, professional organization representing Texas CPAs. The society has 20 local chapters statewide and has 27,000 members, one of the largest in-state memberships of any state CPA society in the United States. TSCPA is committed to serving the public interest with programs that advance the highest standards of ethics and practice within the CPA profession.