How Major Life Events Can Change Your Taxes

Major life changes can affect more than your day-to-day routine. Marriage, a new child, a career move, retirement, a home purchase, or a new source of income can also change your tax situation.

Reviewing those changes during the year can help you:

• Adjust withholding or estimated payments
• Understand potential credits or deductions
• Keep important tax records organized
• Avoid unexpected surprises at filing time

We encourage individuals to think of tax planning as an ongoing process rather than something that happens only once a year. When your circumstances change, a timely tax review can help identify what may need attention.

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Marriage, Divorce, and Changes to Filing Status

Marriage or divorce can significantly change your tax picture, particularly when it comes to filing status, household income, and withholding.

After a marital change, you may need to review:

• Your federal and state withholding
• Filing status
• Dependency claims
• Eligibility for certain tax credits
• Name or household information on tax and payroll forms

For married couples with two incomes, withholding that worked when each spouse filed individually may no longer be appropriate once both incomes are considered together.

Divorce or separation can create similar changes. Even if legal and payroll paperwork has already been updated, it is worth confirming that your tax information accurately reflects your current situation.

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Welcoming a Child or Claiming a New Dependent

Adding a child or another dependent can affect several areas of your tax return.

Depending on your circumstances, you may want to review:

• Payroll withholding
• Child-related tax credits
• Dependent care benefits
• Childcare expenses
• Changes to your household income and cash flow

Families that pay for childcare so a parent can work or look for work may also qualify for certain dependent care tax benefits.

Reviewing these changes early can help you understand which benefits may be available and make sure you are keeping the records you may need at tax time.

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Career Moves, Pay Increases, and Income Changes

Starting a new job, receiving a promotion or raise, taking a second job, or experiencing a decrease in income can all affect your taxes.

Changes worth reviewing include:

• Your Form W-4 and payroll withholding
• Income from multiple employers
• Bonuses or other compensation
• Changes to benefits
• Estimated tax payments
• Eligibility for certain credits

It can be easy to assume that an employer’s payroll system will automatically account for every change. However, multiple sources of income or major changes in compensation may require additional adjustments.

Even a relatively small withholding difference throughout the year can add up by filing season.

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Freelance Income, Gig Work, and Side Businesses

Freelance work, consulting, online sales, delivery driving, and other side income can create additional tax responsibilities.

A few important things to keep in mind:

• Income may still need to be reported even if you do not receive a 1099.
• Taxes generally are not automatically withheld from freelance or gig income.
• You may need to make estimated tax payments.
• Business-related income and expenses should be documented throughout the year.

Whether your side income comes from an occasional project or a growing business, it is important to consider how those earnings fit into your overall tax situation.

Reviewing estimated payments or withholding before year-end can make those obligations more manageable.

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Buying a Home and Reassessing Financial Priorities

Buying a home brings new expenses, records, and financial considerations.

Homeowners may need to keep track of:

• Mortgage interest
• Property taxes
• Closing and purchase documents
• Records of certain home improvements
• Potential itemized deductions

A home purchase does not automatically result in a large tax benefit. Depending on your circumstances, the standard deduction may still be more advantageous than itemizing.

Even so, homeownership creates new recordkeeping responsibilities and is a good reason to review how your tax plan fits with your broader financial goals.

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Retirement, Education Costs, and Unexpected Financial Events

Some financial changes do not fit neatly into one category but can still have an important tax impact.

Retirement

Retirement income may be taxed differently than wages from a paycheck. It is important to consider:

• Pension income
• Retirement account distributions
• Social Security benefits
• Tax withholding or estimated payments

Reviewing these income sources can help reduce the risk of an unexpected tax bill.

Education Costs

Depending on your circumstances, certain education expenses may qualify for tax benefits.

These may include:

• Tuition and eligible fees
• Education-related tax credits
• Student loan interest

Eligibility varies, so keeping records of education expenses throughout the year can be helpful.

Bonuses, Investments, and Other Financial Events

A significant financial event can also change your overall tax picture, including:

• Large bonuses
• Investment gains
• Inheritances
• Legal settlements
• Other unexpected income

Not every type of payment is taxed the same way, but a major financial change is still a good reason to review your withholding, estimated payments, and overall tax plan.

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When Life Changes, Your Tax Plan May Need to Change Too

Not every tax change is obvious or immediate. Small adjustments throughout the year can make a meaningful difference by tax season.

If you have experienced a major life event this year, a mid-year tax check-in with your advisor can help you review your circumstances, make appropriate adjustments, and keep your tax plan aligned with where life is taking you.