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SMALL BUSINESS
Tax-Saving Moves
For Life's Major Events
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As your life changes, so does the set of tax rules that affect you. That's why this compendium of life events is so important -- to alert you to new opportunities to embrace and pitfalls to avoid as your life as a taxpayer evolves.
Check out these 14 major life events, choose the ones that pertain to you and find out what tax moves you can make to save you the most money.
Next: Graduating CollegeMore From Kiplinger:
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Graduating College
So you're getting ready to file your first tax return as an independent person. First question: Who gets to claim an exemption for you (and shelter $3,300 of income from tax)? You or your folks? The answer depends on the circumstances, not on the results of a family meeting. Get More Details
Next: Your First JobMore From Kiplinger:
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Getting Your First Job
Unfortunately, you can't deduct the cost of looking for your first job. When you change jobs, though, expenses such as the cost of printing résumés and travel to job interviews are deductible, as long as you're looking for a job in the same line of work. Get More Details
Next: Getting MarriedMore From Kiplinger:
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Getting Married
Once you're back from the honeymoon, you and your new spouse need to check in with your bosses to adjust withholding from your paychecks. The goal is to match withholding with what you'll actually owe for the year -- so you get neither a big refund or a nasty tax surprise when you file. Get More Details
Next: Birth of a ChildMore From Kiplinger:
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Birth of a Child
Your key to tax benefits is a Social Security number. You'll need one to claim your child as a dependent on your tax return. Failing to report the number for each dependent can trigger a $50 fine and tie up your refund until things are straightened out. Get More Details
Next: Buying First HomeMore From Kiplinger:
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Buying Your First Home
You usually have to pay "points" to the lender. This charge is usually expressed as a percentage of the loan amount. If the loan is secured by your home and the number of points you pay is typical for your area, the points are deductible as interest if you paid enough cash at closing -- via your down payment, for example -- to cover the points. Get More Details
Next: Kid Going to CollegeMore From Kiplinger:
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Kid Going to College
For 2007, you can claim a Hope credit of up to $1,650 if your student is in his first or second year of college and your income doesn't exceed $94,000 (married filing jointly) or $47,000 (for individuals). The credit is based on 100% of the first $1,100 of qualifying college expenses and 50% of the next $1,100. There's no limit on the number of Hope credits you can claim in any year. Get More Details
Next: Changing JobsMore From Kiplinger:
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Changing Jobs
Any severance pay or unemployment you receive is taxable, as are payments for any accumulated vacation or sick time. So be sure that enough taxes are withheld from these. Also, make sure to watch for that final W-2 form. Your former company isn't required to send it to you right away, but must provide it by Jan. 31 of the year after you leave the company. Get More Details Next: Working at HomeMore From Kiplinger:
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Working at Home
If you're working from home, deducting the costs associated with your home office can be a big tax saver, but the rules are tricky. To get the deduction, the law requires you to use your home office "exclusively and regularly" for your business. It must be an area in your home where you don't mix business with other activities. Get More Details
Next: Selling Your HomeMore From Kiplinger:
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Selling Your Home
If you are selling your primary home, the tax law allows you a very generous exclusion for the profit you have made. In fact, most home sales escape taxation altogether. There's a good chance, in fact, that you won't even have to report the transaction to the IRS. Get More Details
Next: Buying a Second HomeMore From Kiplinger:
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Buying a Second Home
If you use the place as a second home -- rather than renting it out as a business property -- interest on the mortgage is deductible just as interest on the mortgage on your first home is. You can deduct property taxes on your second home, too. In fact, unlike the mortgage interest rule, you can deduct property taxes paid on any number of homes you own. Get More Details Next: Major Illness or InjuryMore From Kiplinger:
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Major Illness or Injury
Although everyone knows medical expenses are deductible, in truth very few taxpayers actually get to deduct them. The catch? You must itemize deductions to write off medical expenses, and only about 25% of taxpayers itemize. And, such costs are deductible only to the extent they exceed 7.5% of your adjusted gross income. Get More Details
Next: Getting DivorcedMore From Kiplinger:
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Getting Divorced
You can continue to claim your child as a dependent on your tax return if the divorce decree names you as the custodial parent. If the decree is silent on that point, you would still be considered the custodial parent -- and thus eligible for the exemption -- if your child lived with you for a longer period of time during the year than with your ex. Get More Details
Next: RetiringMore From Kiplinger:
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Retiring
When you retire, one of the biggest changes is that instead of contributing to tax-deferred retirement savings plans that reduce your taxes, you'll start tapping those savings for income and paying taxes at your regular rate -- not the preferential capital-gains rate reserved for stocks and bonds held in taxable accounts. Get More Details
Next: Death of SpouseMore From Kiplinger:
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Death of Your Spouse
Money you inherit is generally not subject to the federal income tax. If you inherit a $100,000 CD, for example, the $100,000 is not taxable. Only interest on it from the time you become the owner is taxed. If you receive interest that accrued but was not paid prior to the owner's death, however, it is considered income and is taxable on your return. Get More Details Next: More on AOLMore From Kiplinger:
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