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September 10, 2019 | Posted in:

Major Life Changes Ahead? Read This!

Getting married or having a baby? Buying or selling a home? Changing jobs? Retiring? These exciting events require a lot of planning, but one often overlooked area is tax planning. Do it now and you will make smart decisions to get the future outcome you desire.

1. Getting married or divorced.

One plus one does not always equal two in the tax world. Marriage means a new tax status, new deduction amounts and income limits, and a potential marriage penalty. The same is true for divorce, but with added complexity. Untangling assets, alimony, child support and dependents are all considerations worthy of discussion.

2. Growing your family.

While bringing home a new child adds expenses to your budget, it also comes with some tax breaks. With a properly executed plan, you can take home the savings now to help offset some of those new costs. If you are adopting, you get an additional tax credit to help with the adoption expenses.

3. Changing jobs or getting a raise.

New job, new salary? Earning more money is great, but you might be surprised that each additional dollar you earn gets taxed at your highest tax rate, and might even bump you to the next tax bracket. The end of your previous job likely adds additional taxable income in the form of accrued vacation or severance. If you are switching jobs, the change also includes things like new benefits
and possibly different taxing jurisdictions.

4. Buying or selling a house.

Naturally, there will be tax implications from the move

Knowing how your taxes will be affected ahead of time will help you make solid financial decisions and avoid surprises. If you’re looking to buy or sell investment property, even more issues come into play like capital gains taxes and other more complicated tax code issues.

5. Planning for retirement.

Some of the factors that go into retirement planning include current income, available cash, IRAs, future earnings, retirement age and Social Security. For example, with traditional IRAs, there are early withdrawal penalties before age 59 ½ and required minimum distributions after reaching age 70 ½. For Social Security, collecting benefits early means less in monthly benefits, and potentially, a higher tax obligation if you have additional earnings. Each source of retirement income has its own set of taxation rules which can create a very complicated tax environment. Put all of these variable together into one analysis to pave a way forward for your retirement.

 

This article was published in Alloy Silverstein’s Fall 2019 Newsletter. Click here for more content or to subscribe.

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