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Tax Tune-Up for Life Situation Changes

November 2, 2015

2015 will end in a few short months. This is a good time to ask yourself, “How am I doing?” Is everything in 2015 status quo with 2014? If not, what has changed? In 2015 will you get married, celebrate the birth of a new child, buy a new home, sell your home, divorce your spouse or go (back) to college? Most of the tax benefits related to these events are subject to eligibility and income limitations. Check with me for the specifics.

Getting Married: Your filing status will change. If you marry by midnight on December 31, 2015 then you will file as married filing jointly or married filing separately on your 2015 tax return. If your name changes, you must contact the social security administration before using your new name on a tax return.

Celebrating the Birth or Adoption of a Child: If the taxpayer is not married, the dependent child may qualify the taxpayer for the Head of Household filing status. The new dependent may also qualify the taxpayer(s) to the Earned Income Credit, Child Tax Credit, Additional Child Tax Credit and possibly the Child/Dependent Care Credit. A finalized adoption in 2015 could qualify you for the Adoption Credit.

Buy a New Home: In addition to the mortgage interest deduction you can also deduct points and mortgage insurance premiums (with certain limitations) and payment of local property taxes paid in 2015.

Sell Your Home: If you sell your home at a profit, the amount of gain that you can exclude from your income is $500,000 if you are married filing jointly or $250,000 if married filing separately or single. In order to qualify for this exclusion you generally must have owned the home for two of the last five years, lived in the home as a main home for two of the last five years and not have sold a home using the home sale exclusion within the last two years.

Divorce Your Spouse: A taxpayer is not considered married for 2015 if legally separated by the end of 2015 by either a final divorce decree or a final decree of separate maintenance. If you do not have dependent children, then you must file 2015 as single. If you have at least one dependent child then you may be able to file as head of household if requirements are met. Alimony payments are generally taxable to the spouse receiving the alimony. If certain requirements are met they are deductible to the spouse paying the alimony.

Go (Back) to College: The American Opportunity Credit is available to students in their first four years of post-secondary education and can be claimed only 4 times. For the Lifetime Learning Credit there is no limit to the number of years this credit can be claimed on qualified expenses of an eligible student. The Tuition and Fees Deduction is claimed as an adjustment to income for qualified education expenses incurred by the taxpayer, spouse or dependent. Student Loan Interest can be deducted up to $2,500 subject to limitations.