Big life events -- marriage, divorce, changing jobs, new babies, among others -- have a huge impact on your taxes. That’s exactly why you need to sit down and review your tax situation after a significant life change occurs.
Take marriage, for instance. Getting hitched is a pretty big deal on the personal tax front.
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“When you're married, you receive some great tax benefits compared to when you're single,” says Lisa Greene-Lewis, a certified public accountant and tax expert at TurboTax. “For starters, you receive lower tax rates. Additionally, if you claim the standard deduction, that standard deduction is going to be larger and more beneficial for married couples.”
For example, Greene-Lewis cites the current standard deduction of $12,200 for single individuals and $24,400 for married couples filing jointly. “The standard deduction is definitely a big tax break for married couples,” Greene-Lewis tells TheStreet host Gregg Greenberg in this special video series with TurboTax.
In the case of divorce, the tax picture is more problematic.
“There are some new wrinkles in the tax laws for divorcees,” Greene-Lewis says. “For instance, if you got divorced in 2019, you can no longer claim any alimony you pay on your taxes. Also, the alimony recipient no longer has to claim that income, and that’s a big departure from past years.”
If you’re starting a job search, there are some significant tax issues in play.
“Unfortunately under the new tax reform law, you can no longer deduct job search expenses,” says Greene-Lewis. “But on the same note, you should look at your IRS W-4 tax form (i.e., the Employee's Withholding Certificate form) and adjust your W-4 accordingly. Anyone who lands a new job is required to complete a W-4 form to provide guidance for the employer on how much tax to withhold.”
If you've had a huge financial windfall, like an inheritance or even cashing a winning lottery ticket, be aware of the tax impact on that income.
“If you’ve experienced a financial windfall, that’s great,” says Greene-Lewis. “Just make sure you claim that income on your taxes and know that it could also bump you up into a higher tax rate.”
“If that’s the case, one smart tax move is to contribute more cash to your IRA to lower your tax liability,” she adds.
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