March 29th, 2011
How To File Your Taxes At Different Life Stages: From College to Your First Home
3 Comments |
** It’s Credit Karma Tax Week! Every day we’ll have tax-related posts to keep you in-the-know as you file your taxes. **
As your life changes, sometimes, so do your taxes. Whether you’re filing taxes for the first time or you’re a veteran filer who just bought his first home, there’s always something new to consider when tax time rolls around.
Don’t miss these tips, based on different life circumstances, to guide you in the right direction before Tax Day is here.
Circumstance #1: You’re in college.
If you’re a student and your parents claim you as a dependent, meaning they pay more than 50% of your expenses, here’s what you and your parents should know:
- There are several tax credits and deductions you may be entitled to that will help with the expense of higher education, such as the American Opportunity Credit, the Lifetime Learning Credit, and the Student Loan Interest Deduction. Check out the IRS’s information center to find out if you qualify for one.
- Work study income is taxable. It can be tricky since some work study programs reimburse students through tuition cuts. If you’re not receiving a paycheck reporting the amount withheld, contact the director of your program for the details of your arrangement.
- Determine your residency. In many cases, your permanent residence will be with your parents. But if you’ve moved out of your parents’ home or attend college in another state, you may have to report taxes in multiple states.
Circumstance #2: You’re on your own for the first time.
If you made at least $9,350 in 2010 and you’re not filing with dependents (read: kids), here are a few things beyond the tax basics to keep in mind before you file.
- If you made less than $9,350 last year, but taxes were withheld from your paychecks, you should file taxes anyway. You’ll be entitled to a refund, so why not file?
- If you’re filing by mail, choose Form 1040EZ. It’s simple to fill out because it’s only for those filing without dependents, and it’s quicker for the IRS to process.
Circumstance #3: You just got married.
If you were married at any time in 2010, even if it was December 31, you’ll still file as married for the entire tax year. Here are a few things to consider:
- You can choose one of two filing statuses: married filing jointly or married filing separately. Don’t assume that filling separately will give you lower taxes. Your withholdings are based on filing status, not whether or not you and your spouse file separately.
- After the honeymoon, adjust your withholdings on your W-4. This is necessary to ensure that come tax time, you don’t owe more than you thought. The IRS’s Publication 919 explains how to make this adjustment.
- If you changed your name when you got married, make sure the Social Security Administration knows. File a Form SS-5 to change your name on your Social Security card so that the name you file taxes under matches to your Social Security number.
Circumstance #4: You’ve made an addition to the family.
If your little bundle of joy was born at any point last year, Junior will count as a dependent for the whole year on your filing status, so keep the following in mind:
- You qualify for the Child Tax Credit. It could mean up to a $1,000 credit per child, depending on your income, so check Publication 972 for details.
- If you’re working and leave your child in the care of a daycare or nanny, you may qualify for the Child and Dependent Care Credit. Read more to find out if you qualify.
- Have your child’s Social Security number handy before you start filing your taxes; you’ll need it to claim a dependent.
Circumstance #5: You’ve bought your first home.
In addition to the possibility that you’re filing in a different state, be aware of other tax-related aspects of being a home owner:
- Make sure the IRS knows your change of address. Change your address with the U.S. Postal Service and they’ll forward along the information to the IRS. If it’s too late, notify the IRS directly using Form 8822 so that they can update your account.
- Everyone talks about the First-Time Homebuyer Credit, but don’t miss out on the chance to claim your moving expenses on your taxes too. The IRS determines your eligibility according to three requirements: if your move coincides with starting work at a new job location, if you meet a distance test, and if you meet a time test. Check out Publication 521 to see if you qualify.
Did you know? The IRS is hip! For the past three years, the IRS has been creating tax-related podcasts, catalogued here for your listening enjoyment.