Life Events With Tax Implications – Phoenix Tax Consultants

Life Events With Tax Implications

Throughout all the major life events, from getting married and buying a house to becoming parents and retiring, taxes play a significant role in your life. Once you understand how these life events affect your tax returns, you can take advantage of it. 

Adopting a Child

You can ask for a 100% tax credit for the amount of qualified adoption expenses incurred by you during an adoption (domestic or international). If you finalized an adoption in 2019, you can request a federal adoption tax credit of a maximum of $14,080 per adoption. If your adjusted gross income exceeds $251,160, this tax credit is eliminated. 

Expenses such as adoption fees, adoption-related travel costs, court costs, and attorney costs are all eligible under the law. 

Natural Disaster

If you were a victim of hurricanes, wildfires, drought, flooding, or any other disaster in a “federal disaster” designated area, you are eligible for relief in the form of extended tax deadlines and other tax benefits. Check out the FEMA website to see if your area was designated as a federal disaster.

You may be eligible to claim casualty losses as an itemized deduction if your area was declared a federal disaster. A casualty loss refers to the destruction, damage, or loss of property from any unusual, unexpected, or sudden event like a hurricane, fire, flood, tornado, volcanic eruption, or an earthquake. 

You can deduct the loss (except for the first $100) to the extent that it surpasses 10% of your adjusted gross income. If any of your losses have been covered by federal disaster funds or reimbursed by insurance, they won’t be tax-deductible.

Gambling Winnings and Losses

If you won any money through gambling in 2019, you are required to report it on your tax return as “other income” on Form 1040, regardless of the amount. If you have won any non-monetary prize, like a trip or a car, you should mention its fair market value as income.

If your gambling winnings were a minimum of $600 and the payout was a minimum of 300 times the amount you wagered, you will receive the Form W-2G. The thresholds are $5,000 for poker winnings and $1,200 for slot machine or bingo winnings. 

And if you ended up losing money, you might be able to deduct them. Just make sure your reported gambling losses are not more than the winnings.

Became a Teacher

Teachers can usually deduct unreimbursed expenses related to school for a maximum of $250 while filing their federal tax returns. If you and your spouse are both teachers/educators, and you have a Married Filing Jointly tax status, you may be allowed to deduct up to $500.

Business owners

Business owners can claim up to a 20% deduction of their qualified business income on their tax returns, but only from “pass-through entities”. Pass-through entities are defined as a partnership, sole proprietorship, S corporation, or limited liability company. This deduction is subject to limitations based on income.

Not sure how to claim your tax benefits? Call us at 610-933-3507 or contact us online to learn more about tax deductions you might be eligible for. 

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