7 life changes that could affect your tax filing status

Your tax filing status helps determine how much tax you owe and what kinds of credits you're eligible for. Experiencing certain changes in your life can have a significant impact on your tax liability. So it's important to take that into consideration before filing your tax return. If you're preparing for tax season, here's a rundown of major life events that could change your filing status.

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1. Tying the Knot

Getting married can affect your tax situation in a big way. First, you'll have to update your filing status from single to either married filing jointly or married filing separately. For most couples, filing a joint return makes sense. It gives them a larger standard deduction and allows them to qualify for certain tax breaks that are unavailable to couples who file separately (such as the Student Loan Interest Deduction).

Filing separately, on the other hand, could be the better choice if one partner makes a lot more money or has a lengthy list of itemized deductions to claim. Crunching some numbers can help you choose the right filing status for you and your spouse.

2. Getting Divorced

life 2 7 Life Changes That Could Affect Your Tax Filing Status

On the flip side of the coin, getting divorced can also have an impact on your tax filing status. If your divorce has been finalized before the end of the tax year, you may have to file as a single taxpayer. You may be able to file as the head of household if you have a qualifying child or another dependent living in your home.

RELATED: 5 super easy ways to lower your taxes:

5 ridiculously simple ways to lower your taxes
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5 ridiculously simple ways to lower your taxes

1. Contribute more to a retirement account

If you put money into a traditional IRA or 401(k) plan, you'll benefit in two ways. First, you'll get the financial security that comes with having savings available in retirement, and the earlier in life you start contributing, the more opportunity you'll give your money to grow. But you'll also benefit from a tax perspective, because the amount you contribute will go in pre-tax. What this means is that if you make $50,000 a year but put $5,000 into your 401(k), you'll only pay taxes on $45,000 of income. Talk about a win-win!

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2. Donate items you no longer use

Is your basement or hall closet overflowing with clothing, tools, and gadgets you don't need? If you donate those items to a registered charity, you'll get to claim a deduction on your taxes. All you need to do is obtain an itemized receipt of what you give away to verify your donation, and you're all set.

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3. Open a flexible spending account

Medical care can be a huge expense for some families. Americans spent an estimated $416 billion on out-of-pocket medical expenses in 2014, and that number is expected to climb to $608 billion by 2019. But if you sign up for a healthcare flexible spending account (FSA), you'll get to pay for eligible medical expenses, like copays and prescription drugs, with pre-tax dollars. For 2016, you can allocate up to $2,550 to an FSA, which means that if your effective tax rate is 25%, you'll save $637 by contributing the maximum. But don't make the mistake of overfunding your FSA. The money you contribute goes in on a use-it-or-lose-it basis, so if you put in the full $2,550 but only rack up $2,000 in eligible expenses, you'll have to kiss that remaining $550 goodbye.

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4. Use pre-tax dollars to pay for child care

Childcare is one of the greatest expenses families with young children face. The average American household currently spends $10,192 a year on full-time day care center care, $7,700 a year on regular after-school babysitting, and $28,900 on a full-time nanny. The good news, however, is that you can shave a fair amount of money off your tax bill by opening a dependent care FSA. Similar to a healthcare FSA, a dependent care FSA allows you to allocate pre-tax dollars to pay for eligible child care expenses, which include preschool and summer camp. For 2016, a couple filing a joint tax return can contribute up to $5,000 a year in pre-tax dollars. If you max out that limit and your effective tax rate is 25%, you'll save $1,250 in taxes. The only catch is that like a healthcare FSA, if you end up spending less during the year on eligible expenses than what you put in, you'll forfeit your remaining balance.

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5. Sign up for commuter benefits

Traffic and rail delays can be a huge source of daily aggravation. But if your commute can't serve the purpose of helping you relax and ease in and out of your workday, it can at least help you lower your taxes. All you need to do is sign up for commuter benefits through your employer, and you'll get to use pre-tax dollars to pay for the costs you already incur. For 2016, you can allocate up to $255 per month in pre-tax dollars for transit and up to $255 a month for parking for a combined total of $510. If you hit that maximum and your effective tax rate is 25%, you'll save $1,530 a year on your taxes.

Nobody likes paying taxes, and there's certainly no reason to pay more than you have to. With a few smart moves, you can lower the amount you ultimately fork over to the IRS and keep more money in your pocket.

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If you're receiving alimony, you'll have to report that on your taxes as income. If you're paying alimony, you'll be able to claim it on your tax return as an above-the-line deduction.

3. Becoming a Parent

Having a baby opens the door to multiple tax breaks, including a credit for childcare expenses you pay out of pocket and the child tax credit. There's a separate tax credit for parents who choose to adopt. Having a child also allows you to claim an additional exemption on your taxes, which can help reduce your taxable income for the year.

Related Article: 6 Factors That Affect How Much Income Tax You Pay

4. Buying a Home

There are certain perks that go along with homeownership, including some tax benefits. The mortgage interest you pay each year is tax deductible if you itemize. Additionally, you may be able to deduct mortgage points and property tax payments.

5. Starting a New Job

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If you spent part of the year looking for a job or you moved to a different state for a new position, you may be able to write off certain expenses associated with those changes. The IRS places certain restrictions on when you can deduct these expenses. But generally, the kinds of things you can claim include the cost of preparing and mailing your resume, travel expenses associated with looking for work, job placement agency fees and the cost of hiring a moving van.

RELATED: 10 things we've all said while filing taxes:

10 things we've all said while filing our taxes
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10 things we've all said while filing our taxes

"It's only January, I have plenty of time!"
You're relaxed, you're casual, what even are taxes anyway? You don't care! It's so far away that filing taxes isn't even remotely on your radar, to be honest.

Photo credit: Getty

"The imminent act of filing is upon me and I literally have nothing ready..."
Tax season is now approaching and that creeping anxiety about getting everything done on time is starting to set in. It's essentially biting at your heels and you know you have to get moving.

Photo credit: Getty

No words. Just emotional paralysis.
You're screwed. You need to start doing your paperwork but you physically do not know where to even begin. It's time. It's happening.

Photo credit: Getty

That anxiety you felt creeping in earlier? Now it's full-fledged onset. This stage is often accompanied by screaming out loud, pulling hair, crying, etc.

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"Wait, did I get all of my papers in? Did I check that one box correctly? Does it look like I'm trying to evade some of these taxes? What if I go to jail? Can I go to jail for that? WHO WILL FEED MY DOG WHEN I AM IN JAIL?!"

It's like handing in an exam in school and wishing you could grab it back and double check your answers one more time.

Who was that celebrity you heard about that went to jail for tax evasion? Because now you're convinced that's totally going to be you.

Spoiler alert: as long as you did everything to the best of your knowledge and ability, you probably won't go to jail. And even if you do, you'll find someone to walk your dog.

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"I got this, I'm almost done, a few more papers and I'm in the clear. I just have to pound through the rest of it. Go me!"

"Go you" is right! Now you're on cruise control and you're on track to get everything done well and on time. You're unstoppable in the delight of the world that is tax filing.

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"Thank god that's over with, now I can relax! What to do with all this stress-free free time!"
Finally, relief. Your papers are filed and sent out into the universe. It's off your back at last. Now on to more important things, like Netflix.

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"When is my return coming? Is this going to be my life for the rest of my life? Yep, it is. So about that return..."
Now, you wait. You want that money. And the inevitable truth that your life will now be a neverending cycle of filing taxes and waiting for your return.

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"SCORE my return was so much better than I expected! I'm buying a new dress. Or five. Probably five, why not?"
You're on a total life-high now. The possibilities of what you can spend your return on seem endless and even if you don't, having a nice bonus hunk of cash in your pocket feels pretty good. It made all of that stress completely worth it.

Photo credit: Getty

"Honestly filing wasn't even that bad this year. And now I don't have to think about it anymore. Well at least not for another year. But no use in worrying about that now!"
Alas, acceptance. You know you'll fall victim to the vicious cycle again when next year rolls around. But truthfully, you wouldn't have it any other way. Okay, you obviously would. But you'll never change your procrastinating ways!

Photo credit: Getty


6. Having an Elderly Parent Move in With You

Taking care of an aging parent can put a strain on your finances. But you may be able to recoup some of the cost at tax time. The child and dependent care credit also applies to certain costs that go along with being a caretaker to an elderly parent. To be eligible for the credit, your parent has to live with you and you have to provide more than half of their financial support. If you itemize, you may also be able to claim a deduction for their medical expenses that you pay out of pocket.

Related Article: What Is the Standard Deduction?

7. Going Back to School

If you decide to further your education, there are several tax benefits you may be able to claim. The lifetime learning tax credit, for example, is a credit you can claim for covering the cost of certain qualified education expenses, such as tuition, fees, supplies, books and equipment. Just remember that you can't claim more than one tax break for the same expenses in the same year.

Final Word

When it comes to your taxes, you can't afford to miss any opportunity to lower your bill or increase the size of your refund. Thinking about how your financial situation may change from year to year can ensure you don't overlook any valuable tax savings.

Photo credit: ©iStock.com/simazoran, ©iStock.com/BernardaSv, ©iStock.com/sturti

The post 7 Life Changes That Could Affect Your Tax Filing Status appeared first on SmartAsset Blog.

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