• A lot can happen in your lifetime – you may get a job, go to school, get married, start a business, change jobs, have children, send children to college, buy or sell a home, get divorced, contribute to a retirement plan, or withdraw money from a retirement plan. American Tax Value is here to help you regardless your situation.

    • Filing Status
    • Children
    • Divorce
    • Jobs
    • Gifts and Inheritance
    • Home Buying or Selling
    • Individual Retirement Arrangements (IRAs)
    • Retirement
    • Death

     Children

    For tax purposes, if your child is born on December 31, they are assumed to have lived with you the entire year. For each qualifying child, you can claim a dependent's exemption. For each qualifying child under the age of 17, you may be eligible for up to a $1,000 child tax credit or additional child tax credits. If you and your spouse both work or are looking for work, or if one is in school or disabled, you may be eligible for the nonrefundable child and dependent care credit for children under age 13 or for a disabled child of any age. You may be able to take a tax credit for qualifying expenses to adopt an eligible child. Children who are working cannot claim their own exemption if they qualify to be claimed as a dependent on the parent’s return.

    Divorce

    For tax purposes, if you are divorced or legally separated as of December 31, you are considered to be unmarried for the entire year. If divorced or legally separated, your filing status is single unless you qualify to file as head of household. The custodial parent, or the parent with whom a dependent child lives, does not lose the head of household filing status by allowing the non-custodial parent to claim the exemption for a dependent child.

    Jobs

    If job expenses are incurred and not reimbursed by your employer, you may be able to claim them as employee business expenses. If you move to take a new job, you may be eligible to claim moving expenses.

    Gifts and Inheritance

    Property received as a gift retains the basis of the donor. Inherited property receives a stepped-up basis to the fair market value (FMV) of the property on the date of the decedent's death. Certain inherited property, such as IRAs and pensions, are taxable or have a portion that is taxable when distributed to the beneficiary.

    Home Buying or Selling

    Points paid when you purchase your home are generally deductible in that year. Mortgage interest and real estate taxes paid on your home are deductible. When you sell your home that you owned and lived in for two of the last five years, the profit on the sale up to $250,000 ($500,000 for married filing jointly) is not taxable. If you have an office in your home, that portion of your home is considered business property. If you sell your home, you may be able to exclude the gain on the sale except for the amount of any depreciation claimed after May 6, 1997.

    Individual Retirement Arrangements (IRAs)

    You may be eligible to contribute up to $5,500 ($6,500 if age 50 or older) a year to a traditional IRA. All or part of the contribution may be deductible. This money grows tax-free until withdrawn, and then the deductible contributions and earnings are taxed. If the money is withdrawn early, it becomes taxable as income and may be subject to 10% additional tax. If money is withdrawn from an IRA prior to age 59½, an additional 10% tax is assessed unless certain exceptions are met (example: buying a home for a first-time home buyer, or withdrawing to pay for qualified education or medical expenses)

    Retirement

    Pensions and annuities are generally taxable when distributed. Normally, you must start withdrawing from a traditional IRA by April 1 of the year following the year you reach age 70½. If you are age 65 or over, and are below certain income limits, you may be eligible for the nonrefundable credit for the elderly or the disabled. When receiving a pension, be sure to have taxes withheld, or you may need to make quarterly payments using Form 1040-ES, Estimated Tax for Individuals. That way, you will not owe too much tax at the end of the year and become subject to the penalty for underpayment of estimated tax.

    Death

    The same filing requirements that apply to individuals determine if a final income tax return must be filed for the decedent. The personal representative must file the final income tax return of the decedent for the year of death and any returns not filed for preceding years. The surviving spouse can file married filing jointly for the tax year in which the spouse has died. The surviving spouse may file as a qualifying widow(er) for 2 years following the death of the spouse if unmarried and have a dependent child. An estate tax return may also need to be filed.