Whether you got married last year or purchased your first home, changes experienced in your life can bring about many questions and uncertainties. Although you may have questions about how life events affect your finances, one thing is certain, your (what might seem crazy) ever-changing life can save you money on your taxes.
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Did you get married last year? Purchase your dream home? Have a baby? Or have another life change?
Don’t worry, we have you covered
Check out just a sample of big life events that could save you money at tax time and how we can help you.
Getting married
Did you get married this year, or are you considering it? We know weddings cost a bundle and can really set you back, but one perk of getting married is that you could now see some bigger tax benefits than when you were single.
Now that you’ve tied the knot, you and your loved one can now file your taxes as married filing jointly and may see lower tax liability than when you were single. This is because there are lower federal tax rates for couples who file married filing jointly compared to filing as single. Most married couples will see tax savings or a “marriage bonus”.
You may also see bigger tax deductions and credits now that you can file as married filing jointly. For example, there’s a bigger standard deduction for tax year 2021. The standard deduction increased to $12,550 if you are filing as single and $25,100 for married filing jointly. Also, for 2021 the Earned Income Tax Credit is up to $6,728 with three kids if you are married filing jointly. Even if you were married on December 31 of last year, you are considered married all year and can reap the rewards of being married.
Buying a new home
Homeownership is a big and rewarding life change that is also one of the biggest tax savings people see. Your mortgage and property taxes can really break the bank, but if you purchased a home this year or you are considering it, you can deduct your home mortgage interest and property taxes.
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Having a baby
Did you have a baby last year? If so, congratulations on your new addition to the family! Combined with all the joy and excitement a child brings, you may be trying to figure out how you’re going to pay the costs of supporting your baby.
Well, fortunately, your family is now eligible for new tax deductions and credits as well. Some of the tax benefits you will receive for having a baby are the child tax credit and child and dependent care credit. The increased credit is a benefit to new parents.
Starting in 2021 (the taxes you file in 2022) the Child Tax Credit increased from $2,000 to:
- Up to $3,600 for each qualifying child under 6
- Up to $3,000 for each qualifying child age 6 to 17
This is the first time that families with children age 17 will be eligible for this credit.
For the 2021 tax year only, the Child and Dependent Care Credit expanded in several ways. The percentage and the child care expense thresholds expanded, so you can get a credit up to 50% of $8,000 ($4,000) in child care expenses for one child under 13 and up to 50% of $16,000 in expenses ($8,000) for families with two or more dependents. In previous years, this credit was not refundable, but when you file your 2021 taxes this credit will be refundable if you lived in the U.S. for more than half the year. That means even if you don’t owe any taxes, you may be able to get all of the credit in the form of a refund.
You can see why your new baby can be considered your biggest little tax deduction.
TurboTax can help you save money through life’s transitions
Life transitions may feel like many things at once: exciting, emotional, confusing, hopeful, and often expensive. On the bright side, these life moments often bring big tax benefits.
Don’t worry about knowing these tax rules. TurboTax will ask you simple questions and give you the tax deductions and credits you’re eligible for based on your answers.
If you have questions, you can connect live via one-way video to a TurboTax Live tax expert with an average of 12 years of experience to get your tax questions answered from the comfort of your couch. TurboTax tax experts are available in English and Spanish, year-round and can also review, sign, and file your tax return or you can just fully hand your taxes over to them. All from the comfort of your home.
