How Changes in Your LIfe Can Save You Money

1. Getting married

Did you know that getting married often results in a welcoming tax break? Filing jointly will typically award you lower tax rates, as well as higher deductions and credits. This is due to lower federal tax rates for couples compared to filing as single. Even if you waited until the last day of the year to get married, you are still considered married all year when it comes tax time and can reap the rewards of tying the knot.  (However, this is not guaranteed and there may be instances where being married can increase your taxes.)

2. Buying a new home

Homeownership is a big commitment with a lot of upfront costs. However, it is also one of the biggest tax savings people see. The IRA offers a range of tax credits and deductions designed to lighten the financial load for homeowners.

One of the biggest tax benefits of homeownership is the home mortgage interest deduction. This deduction allows you to subtract the interest you pay on your mortgage loans from your taxable income, resulting in potential savings come tax time.

Additionally, property taxes may offer tax savings through the property tax deduction. This deduction allows homeowners to offset some of the financial burden of property taxes by deducting them from their taxable income. To claim it, you will need to itemize your deductions on Schedule A on form 1040. This can be a smart financial move and keep more of your hard-earned money in your pocket.

3. Having a baby

Did you have a baby last year? If so, congratulations! Not only on the new baby but also on the new tax deductions and credits you are now eligible for. Some of the tax benefits you will receive for having a baby are the Child Tax credit, and if you pay for child care, the Child and Dependent Care Credit.

For the 2024 tax year (taxes filed in 2025), the credit is worth up to $2,000 per qualifying dependent child, and the refundable portion is worth up to $1,700. The credit amount remains the same for 2025 (taxes filed in 2026).

The child and dependent care tax credit is designed to help people who work or are looking for work offset expenses related to the care of a child under 13 or a dependent with a disability. It’s important to notice that this credit is nonrefundable. This means that any taxes owed will be decreased by the credit amount, but taxpayers will not receive any overage of the credit in the form of a refund once their tax bill goes down to $0. Generally, the child and dependent care tax credit is worth 20% to 35% of up to $3,000 (for one qualifying dependent) or $6,000 (for two or more qualifying dependents). This means that the maximum child and dependent care credit is $1,050 for one dependent or $2,100 for two or more dependents.

4. Retirement contributions and distributions

Contributing to a retirement plan or a 401K plan can get you rewarding tax deductions. However, once you start withdrawing money out of your retirement account, expect to be taxed on that distribution.

While this is only a few of life’s events, there are many of these life transitions that bring big tax benefits. It is important to know what you qualify for and what their rules are prior to filing your taxes each year.