Among the many concerns that you’ll have when deciding to start a family, an important one to remember is how it can affect your finances. Taxes especially can be changed quite drastically when you add children to your home, so it’s crucial to familiarize yourself with some of the aspects that might be different when tax season rolls around this year.
Save money
Children can be very expensive, which can make saving your money difficult. However, if you can save money throughout the year, it will make tax time much easier on your budget. If you are already saving money because you are planning to start a family, then great! You will have more money to invest in your family and less on taxes. If you find that you’re spending too much because of your new bundle of joy, then it’s important that you find out why so that you can make changes and fix your finances before another tax season comes around.
Create a budget
A family budget is an essential first step when starting a family and is also easy to forget, as many don’t do so until they get an unexpected burst of income. A budget should consider income, expenses and debts and be written accordingly, as it will guide you for the year ahead. Having a solid handle on your expenditures and income will help you track down any errant spending and let you get as much out of your potential tax refund as possible.
Take advantage of deductions for dependent children
When filing your taxes, you can register your children as dependents, which helps to reduce the amount of money you’ll have to pay. However, you will have to make sure both your employer and the IRS know that you’ve recently expanded your family, as these benefits don’t take effect until you ensure the paperwork is properly filed.
Make sure you don’t overpay
Filing taxes alone is difficult enough, but sometimes when you change filing status and/or add dependents, it can be a mess to find out exactly what you owe. If you overpay, the IRS will eventually send you a refund for whatever the balance is, but it’s better if you just keep that money on hand. There are websites and software online that can help you evaluate your income, but if you prefer, there are other options available.
Make an appointment with a tax specialist
For example, you can hire someone to help. It’s best for parents to have a family tax specialist on hand if they are not familiar with handling taxes. A good tax specialist, such as Golden Tax Relief, can help you get the most from your deductions, help set up multiple savings accounts, and ensure that you don’t pay more than you need to in taxes when filing. This can save you from having to do multiple returns or paying penalties, which is more money out of your pocket.
Taxes can be tricky most of the time, but there are ways to make them as painless and streamlined as possible. The above steps will help out if you are still new to handling taxes when starting a family, but it can never hurt to be as informed as possible. Feel free to research anything you have more questions about.
