One of the most surprising things about raising children and helping them move out independently is just how many tax deductions and credits you’ll lose access to. Once they’re independent, you’ll miss out on the child care credit, earned income credit, personal exemptions and the college tuition credit. Parenting might be its own reward, but the higher tax liability—often right when you’ve paid off your home, student loans and other debts—can be a blow. Here are some of our best tax tips for empty nesters in Union City, NJ:
- Think about replacing your old appliances: The federal and state government often give tax credits for people who replace their old appliances, add solar panels and generally make energy-saving upgrades. Talk to your favorite tax professional about the home improvements you can make, which will benefit you at tax time—not to mention any time a utility bill comes due.
- Try work-related deductions: If you typically receive a large refund at the end of the year, you might adjust your W-4 to withhold fewer taxes. This has the benefit of a bigger paycheck each month, although the downside is that you likely will not receive a big refund check come tax time. Be sure to discuss this with your financial advisors and tax professionals in order to ensure you’re not setting yourself up for unexpected tax liability or other issues.
- Invest wisely: If you have long-term investments, they may increase your tax bill. Consider investing—with the approval of your financial and tax advisors—in tax-free bonds, as well as buying mutual funds before the dividend payout and making sure their buy and sell activity won’t negatively affect your tax bill at the end of the year. Empty nesters can also take advantage of plenty of IRS deductions that will keep taxes at a manageable level. This makes it more than worth it to hire a tax professional—the money you stand to save will almost certainly be more than you owe for their services.
- Make charitable donations: Finally, making charitable donations can help lower your tax liability, and contribute to worthy causes at the same time. You can often deduct cash contributions, non-cash donations (clothes, cars, food and more) and often, mileage driven in the course of charitable work. If you’re getting ready to downsize your home and move to somewhere more manageable, make sure to talk to a tax professional. They may be able to help you maximize deductions based on your move.
No matter your financial situation, having your children move out on their own usually means a hit to your taxes. Instead of paying the increased amount, it’s worth working with tax advisors to soften the blow. In fact, if you contact them early enough, you may be able to strategically plan for your youngest child’s move-out date well in advance.
If you need help finding tax deductions for empty nesters in Union City, NJ, contact Kedean’s Generation today. We pride ourselves on helping clients minimize their tax liability no matter their circumstance.
Categorised in: Tax Preparation