Taxes and Life Changes

Answer: Congratulations on being ready to hand in your tax documents; it’s always such a relief to hand them in to your CPA. There are two things that are guaranteed to change your federal tax situation: life and legislation. Before delivering your documents over to CPA, take a moment to reflect on any major life events from the past year. At least six milestones could affect your overall tax strategy, and your tax professional and CERTIFIED FINANCIAL PLANNER® practitioner will want to know about them as soon as possible.

“I Do…”

Marriage often changes your filing strategy. Filing jointly typically results in a lower overall tax bill, but that’s not always the case; it’s worth analyzing. Make sure the name on your return matches what’s on your Social Security card and update your W4s at work if needed.

“I Don’t…”

Divorce also comes with filing changes. Your filing status is determined by your marital status on December 31. So, if your divorce is finalized in 2026, you’ll still file your 2025 return as married filing jointly or married filing separately.

Only one parent can claim each dependent. If you have two children, each parent might claim one. If there's an odd number of children or no agreement, the IRS generally gives priority to the custodial parent who is also the only parent eligible for the child tax credit.

Welcome to Our World

Children, whether biological, adopted, step or foster, often bring tax advantages. You may qualify for credits related to care expenses, education, and the child tax credit. Single parents can often file as head of household, which offers a higher standard deduction and more favorable tax brackets.

New parents may also want to explore 529 college savings plans. Contributions grow tax-deferred, and many states offer deductions or credits.*

Upsize, Downsize, or Right-Size

Buying a home may open the door to deductions for mortgage interest, property taxes, and points paid if you itemize. Certain home improvements and energyefficient upgrades can also qualify for credits.

Selling your home? If you meet ownership and residency rules, you may exclude up to $250,000 of gain from your income—or $500,000 if married filing jointly.

Loss

When someone passes away, a final tax return—and possibly an estate tax return—will be required.

Assets inherited by heirs generally aren’t taxable as income at the federal level, except when withdrawing from inherited retirement accounts like IRAs or 401(k)s.

For investments and property, heirs typically receive a stepped-up cost basis, meaning taxes apply only to gains after the date of death.

A surviving spouse may still file jointly for up to two years, provided they haven’t remarried and meet IRS requirements.

Job Changes

New job? You’ll need to update your W4. Lost a job? Remember, unemployment benefits are taxable. Received a raise? You may have moved into a new tax bracket. That could be a good time to adjust your withholdings or increase contributions to tax-advantaged retirement plans. Higher income might also affect your ability to contribute to or deduct contributions to IRAs or Roth IRAs, which depend on your modified adjusted gross income. If you retired this year, talk with your financial team before taking any withdrawals from retirement accounts, since distributions are typically taxable.