Consider life changes that may alter your tax situation
Published 12:00 am Sunday, August 19, 2007
In addition to keeping up with all of the tax law changes that may affect you, it’s also important to consider changes in your life that may alter your tax situation.
Marriage or divorce
Either event should trigger a review of your tax situation. Because of the change in your filing status, a different tax rate schedule will be used to figure your income taxes. A different standard may also apply.
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Sale of a principal residence
Like many taxpayers, you may be living in a home that has appreciated since you bought it. If you plan to sell your home in the near future, consider the potential tax impact. Profit of up to $250,000 ($500,000 if married filing jointly) can be excluded from income if you have owned and used the home as your principal residence for at least two of the five years before the sale and you haven’t used the exclusion for another sale in the past two years.
In addition to lifestyle changes, retirement can bring with it significant financial changes. If you plan to retire soon, keep taxes in mind as you review your investments and decide how to withdraw benefits from workplace retirement plans and individual retirement accounts.
Tax planning has always been important. Congress continues to tinker with the tax code, making it more critical than ever to develop a comprehensive planning approach that considers today’s tax law and anticipates future changes.
Bill Rush Mosby, Jr. is a Certified Public Accountant with the accounting firm of Silas Simmons, LLP, located in Natchez Mississippi.