Key Takeaways

• • • • • • • • • Important life changes often have tax implications, so it’s important to keep track.
                  
                • Consult your tax advisor or use a service like TurboTax, available in Lake City Bank Digital.
                  
                • Planning, like updating withholding as changes arise, can help you avoid tax liability.

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  • When changes happen to you and your family members, they affect all aspects of your life—including income taxes. Read on about five major life events and how to deal with potential tax changes you’ll want to address in your family tax planning.
    

    1. Getting Married and Your Income Taxes

    Working couples: adjust your withholding to reflect your combined incomes, which may move you to a higher tax bracket and tax liability. To make the change, complete a new Form W-4 through your employer.

    Intuit TurboTax®* (available through Lake City Bank Digital) has a calculator to help determine your new withholding status.

    If you’ve changed your name, make sure the name on your tax return and the name on your Social Security card match. (Request an updated Social Security card.) If not, your return could be rejected and your refund delayed.

    No time to update your name with Social Security? File your tax return jointly using the name that’s currently on your Social Security card.

    Remember, the IRS considers you to be married for the full year if you’re married by December 31 of the tax year, making your filing status married filing jointly or married filing separately.

    2. Having a Baby Comes with Tax Credits

    Your new bundle of joy needs a Social Security number, which you can obtain when you request a birth certificate at the hospital.

    If you forget, file Form SS-5 with the Social Security Administration and include proof of the following for your child:

    • Age,
    • Identity
    • Citizenship

    Complete a new Form W-4 (through your employer) to update your withholding based on your new dependent. If you’re single, you may qualify to file as Head of Household, which usually means a higher standard deduction and improved tax brackets.

    Your new baby includes a child tax credit. Check with your tax advisor or use TurboTax to determine the tax implications.

    Saving for your child’s future starts now. Education savings accounts help you save for costs later.

    3. Tax Implications of Getting Divorced

    Your filing status changes when your divorce is finalized, so review and adjust your withholding to reflect income changes. To make the change, complete a new Form W-4 through your employer.

    TurboTax has a calculator to help determine your new withholding status.

    If you’ve changed your name, make sure the name on your tax return and the name on your Social Security card match. If not, your return could be rejected and your refund delayed.

    You may be able to file as head of household if you have primary custody of a child, which usually means a higher standard deduction and improved tax brackets.

    4. Pay Attention to Income Taxes When Receiving a Raise

    Make sure to adjust your withholding when you receive a raise; your increased income may increase your tax liability. To make the change, complete a new Form W-4 through your employer.

    TurboTax has a calculator to help determine your new withholding status.

    Adjust your retirement savings to reflect your new income. Any pre-tax contributions you make lower your overall tax liability.

    5. Buying a Home and Tax Implications

    Within limits, and if you itemize deductions, you can deduct mortgage interest and any points paid when you purchased your home.

    You can also deduct property taxes up to certain limits.

    Life changes don’t have to create headaches at tax time. While these tips can help you stay on track, they aren’t a substitute for personalized tax advice—so consult your tax advisor. You can also turn to TurboTax for helpful tools, calculators, and filing support.

     

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