Getting Married, Buying a House and Having a Child
If you will experience a significant life change this year like getting married, buying a house, or having a baby it may change your tax filing status or qualify you for additional benefits. It is important to know how this change can affect your tax return. Here are some tax tips on what you need to do if you experience one of these life events.
If you got married, review these tax tips so you will be prepared for tax season.
- Filing Status. If you were married before midnight on December 31, 2015, you have to file as “married filing jointly” or “married filing separately.”
- Change your Withholding. You may want to change your income tax withholding by changing your exemptions on Form W-4.
- Name Change Requirements. If you change your last name, you need to contact the Social Security Administration by filing Form SS-5. If you file your tax return and your last name does not match your social security number, it will postpone your refund.
Buying a House
If you bought a house, make sure you review these tax deductions available to those who itemized their deductions:
- Property taxes
- Be sure to check for any taxes paid at your closing
- Interest paid on a mortgage/home equity loan (Form 1098)
- Points you paid when purchasing the house
Keep records of any major home improvements, so that when you sell the house, you can add these improvements to your cost basis, reducing any potential future gains.
Having a Baby
Your new baby will allow you to claim additional tax deductions. These tips will help you when filing your return.
- Apply for Social Security Number. You need to obtain a social security number for your child in order to claim them on your tax return. Claiming your child will allow you to exclude $4,000 from your income in 2015. You are eligible for the full exemption, no matter what month the child was born. Keep in mind high earning taxpayers gradually lose the deduction of exemptions through phase-out rules. If you are subject to Alternative Minimum Tax (AMT), exemptions are not allowed.
- Child Tax Credit/Additional Child Tax Credit. You may be eligible to claim the $1,000 child tax credit, which is available until the year the dependent turns 17. If your modified adjusted gross income is above a certain threshold, the credit is limited. The income range when this phase-out begins varies depending on your filing status. A credit differs from a deduction, which reduces the amount of income the government gets to tax; a credit reduces your tax, dollar for dollar. If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be eligible to claim the Additional Child Tax Credit.
Contributed by Andrea McClure. Andrea joined Chemung Canal Trust Company in 2014 as Manager of Tax Services in our Wealth Management Group.
For additional guidance, please contact Marci Cartwright at 607-737-3754 or email@example.com.