We all have life changing events that drastically change our perspective on life because they can affect our finances. Getting a promotion, having a baby, or even losing someone you love are significant events that will impact your expenses. This change will also affect your taxes; therefore, you should be prepared for life changes and taxes.

This article will discuss how you can easily manage and minimize the damage from these events, especially on your taxes.

6 of the Most Common Life Changing Events

Many events can significantly impact your life, but the following are 6 of the most common ones.

When You Marry

One of the most common change of life event when you need to consider how to file your taxes. There are two options, one filing as a couple or the second as "married and individually." Filing together will get you a higher deduction, plus the IRS allows for lower tax rates. Sometimes, filing individually can save you more and help with different insurances if your earnings are below a threshold.

But before you finally file, you, as a couple, will have to change a few things.

• Change the name on the filing form to match your social security card, register as a family, and file with SS-5.
• If one of you or both have moved to a new address, the tax form should be updated.
• You are updating your W4 Form from your employer because of the change in your status. Families sometimes avoid filing jointly because they may have to pay more because of their combined income.

One more thing you need to consider is that no matter which month you are getting married, as long as it is registered before the filing date, you must file for the entire year.

If you are both working, you can benefit from each other's insurance. If, for example, your company has better health insurance, you can talk to HR to stop your spouse's insurance and bring it into yours.

Adding One More to The Family

If you are having a baby, you are entitled to tax deductions and child tax credits. The same applies if you adopt one that requires updating your social security number as soon as possible.

Updating the social security number will allow you to apply for a better tax rate. On the other hand, if you adopt a young one, you get additional benefits. Some of them are as follows:

• Court fees for the adoption process.
• Adoption fee.
• Transportation expenses leading up to custody.

A New Home

Buying a new home is expected if you upgrade your lifestyle or welcome a new family member. There are some tax rebates if you do, some of which are:

• Real estate taxes are now part of tax deductions.
• You get better mortgage interests or chalk them up for better tax deductions.
• You will also gain residential energy credits for your new home sweet home.

We recommend that you start itemizing your financial report for tax filing when such life changing events happen. Furthermore, if you are filing as a couple and selling your old home, keep in mind that you can get gains on taxes. The tax rebate can easily be up to $500,000 in this case.

Job Switch

The math is quite simple when you are working and paying taxes on your salary every month. The more you allow to be withheld from your salary, the higher your tax return will be.

The issue is that you have a lower budget for the whole year. The lower the refund is, the lower you allow it to be withheld, but it will enable you to spend more and ease your life.

Now, these choices are at your discretion based on your monthly budget. The best part is that whenever you switch jobs, you can change the withholding amount based on the recent changes to your budget.

Keep in mind that this is not similar to getting a raise or a promotion, which will lead you to move up a tier in the tax bracket.

Losing Your Spouse

It can be heartbreaking to lose your loved one, but you have to change your status. The filing status change for such life changing events can be held for two years after the death happens. This reduces the amount of tax you have to pay. But it changes immediately if you remarry within the first year of the death.

But if you want to gain the benefits of married filing jointly" because you remarried soon, you won't earn any benefits within the first year. You will still be taxed the same because of your previous change in status.

Getting Divorced

Getting divorced is hard and a sad part of life changing events, but you still have to file your taxes, though you can at least file individually. This also allows the IRS to register your divorce because you are filing individually.

Now, if your divorce is finalized before the last day of the year, well before the filing deadline, you have to file separately. Plus, this situation will change your tax bracket and have a big effect on your tax deductions.

Final Words

Many different life changing events can significantly impact how you file your taxes. The point is to gain as many potential benefits as possible to ease your transition, whether having a child, buying a home, or divorcing. However, you need to update your data to gain any such benefit from this change of life event.

Secondly, you must itemize everything, especially if you are a couple, so the IRS can approve your tax filing as soon as possible.