How does having a family affect your end-of-the-year tax calculations? The answer is: It depends! Whether you’re married or divorced, have kids or are childless, or are supporting any of your relatives, here are some tax strategies to keep in mind for the coming year.
If your children work for you, treat them as employees.
If you have children who are under the age of 18 who have helped you out in any capacity with your business, your smartest move is to treat them like your employees—at least to the extent that you pay them and use a W-2. The reason for this is that, if your business is run as a spousal partnership, a sole proprietorship, or a single-member LLC, the wages you pay your child for working are both exempt from the federal payroll tax and deductible on your part. Your child can also make a tax-deductible contribution of up to $5,500 to a tax-deductible IRA, or a non-deductible contribution of up to $5,500 to a Roth IRA.
If you’re planning to change your marriage status, wait.
If you are planning to get divorced, it’s best for tax purposes to wait until after December 31. The exception to this rule is if you are going to make alimony payments as part of your divorce settlement. By the same token, if you’re planning to get married, getting married either on or before December 31, 2018, it could be advantageous to you in terms of your annual taxes.
If you share a mortgage, don’t rush to the altar.
Similarly, if you are living with a partner, you can deduct more interest on a mortgage that you share if the both of you are single than if you are a married couple. While you can deduct up to $2 million on a mortgage if you are an unmarried couple who own a home, you can deduct only up to $1 million if you are a married couple in the same position.
If you have dependents, don’t forget them.
Do you have any dependents whom you help out with money, such as your elderly parents? If they fall into the 0 percent capital gains tax bracket, then giving them money—or appreciated stock—could be to your advantage.
Are you looking for professional assistance with preparing your taxes in Tucson? If so, it’s time to get in touch with The Royce CPA Firm. You can set up an appointment with us by visiting our website and filling out our online form.