Life can be a rollercoaster, and the events that accompany it can have profound effects on our relationships, mood, psychological well-being, and—perhaps most confoundingly of all—our taxes. Follow along as we walk you through six common life events that will affect your tax situation and what kind of impacts they may have.
Marriage
Marriage can change your tax brackets, as your combined income will likely be higher than what you were earning as an individual filer. It’s worth looking at the IRS tax brackets and deductions for joint filers. Filing separately after you get married isn’t often advantageous, but this may vary on a case-by-case basis. Consider meeting with a tax professional for personalized advice.
Having or Adopting Children
If you qualify, you may consider taking advantage of the Child Tax Credit. For 2024, the credit is up to $2,000 per qualifying child. A portion of this credit is refundable.[1] Several states also have their own child tax credits or other credits for families with children.
If you adopt, there is also the Adoption Credit. On 2024 tax returns, qualifying recipients can claim up to $16,810 in qualified expenses. Additionally, if you receive adoption benefits from your employer, you can exclude up to $16,810 of those benefits from your income. This credit is nonrefundable, however.[2] If you pay someone to take care of your child while you work or look for a job, you could also qualify for a child and dependent care credit.[3]
Education
Whether you’re at a four-year college or just taking courses to advance your career, you may qualify to take advantage of the Lifetime Learning Credit. This credit is worth up to $2,000 of education expenses and is not refundable.[4]
There is also the American opportunity tax credit, which is for eligible students pursuing their first four years of higher education. This credit provides up to $2,500 annually per eligible student. If the credit brings the amount of tax you owe to zero dollars, up to 40% of the remaining amount of the credit is refundable—up to $1,000. To qualify for this credit, you must be enrolled at least half time and pursuing a degree or other recognized education credential.[5]
Buying or Selling a Home
Homeownership can affect your taxes, too. Buying a home, owning a home, and selling a home can all provide unique tax benefits.
Owning a home means you can deduct mortgage interest. You can deduct interest paid on the first $750,000 of your mortgage (or $375,000 for married individuals filing separately). You can also deduct up to $10,000 from property, state and local income taxes as an individual filer.[6]
Selling a home may also have tax implications. Those who sell their main home for a capital gain may be able to exclude up to $250,000 of that gain from their annual income. Others may experience a loss when selling a home, but this loss is not deductible.[7]
Retirement
In retirement, your income may come from different accounts—including Roth IRAs, traditional IRAs, annuities, Social Security, and pensions. Knowing how these accounts are taxed as you take distributions will be important. For example, a Roth IRA is taxed at time of contribution, so distributions will be made tax-free. On the other hand, traditional IRAs will be taxed at your income rate at time of withdrawal.
Career Growth
So, you’ve landed a raise at work! Fantastic. What if it pushes you into the next tax bracket? You’ll likely end up paying more in federal or state taxes on each additional dollar you pay in that bracket. For more information on the current federal income tax brackets, check out IRS.gov. State taxes vary by state—some have adopted a flat tax while others have brackets similar to that of the federal rates.
As these exciting events occur in your life, a tax professional can help you stay informed about how they will affect your taxes. This way, you are prepared to take advantage of benefits and manage any additional tax burden. Having the knowledge you need can help make the rollercoaster of life that much more enjoyable.
The opinions contained in this material are those of the author and not a recommendation or solicitation to buy or sell investment products. This information is from sources believed to be reputable, but Cetera Advisor Networks LLC cannot guarantee or represent that it is accurate or complete. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.
[1] “Refundable Tax Credits.” Internal Revenue Service, n.d. https://www.irs.gov/credits-deductions/individuals/refundable-tax-credits#:~:text=Child%20Tax%20Credit%20(partially%20refundable)&text=For%202024%2C%20the%20credit%20is,at%20the%20end%20of%202024. Accessed 24 Feb 2025.
[2] “Adoption Credit.” Internal Revenue Service, n.d. https://www.irs.gov/credits-deductions/individuals/adoption-credit. Accessed 12 Feb 2025.
[3] ”Topic no. 602, Child and Dependent Care Credit.” Internal Revenue Service, n.d. https://www.irs.gov/taxtopics/tc602. Accessed 12 Feb 2025.
[4] “Lifetime Learning Credit.” Internal Revenue Service, n.d. https://www.irs.gov/credits-deductions/individuals/llc. Accessed 12 Feb 2025.
[5] “American Opportunity Tax Credit.” Internal Revenue Service, n.d. https://www.irs.gov/credits-deductions/individuals/aotc. Accessed 12 Feb 2025.
[6] Conde, Arturo, and White, Jeff. “Tax Benefits of Owning a Home.” SmartAsset, 19 Dec 2024. https://smartasset.com/taxes/tax-benefits-of-owning-a-home. Accessed 12 Feb 2025.
[7] “Tax considerations when selling a home.” Internal Revenue Service, n.d. https://www.irs.gov/newsroom/tax-considerations-when-selling-a-home. Accessed 12 Feb 2025.
