VIEWpoint Issue 2 | 2022
Inflation Reduction Act: Highlights of Key Changes for You and Yo...
2022-2023 Tax Planning Guide
Funny thing about life is . . . it changes. And when it does, who do you trust to go to for help? Most people might only think of accountants as a go-to for tax questions, but they can be much more of a trusted advisor than that if you let them.
Major life-changing events typically always impact your finances in some way warranting a conversation with your accountant for the proper level of guidance. Outlined below are seven life changes you should include your accountant in on:
Marriage will change a lot of things in your life, and how you file your tax return is one of them. Upon getting married, you’ll need to merge assets and finances. You can rely on a CPA and knowledgeable tax advisor to help you understand the ramification of this in terms of limiting your tax liabilities and setting up your financial accounts accordingly.
On the front-end of a marriage, a CPA can help you in managing your prenuptial agreement and overall finances, along with your legal counsel of course.
Unfortunately, some things don’t always last forever. When your marriage doesn’t, you quickly turn to your divorce lawyer for help – but don’t forget to reach out to your CPA. Your accountant should be made aware of your divorce to help deal with finances and custodial issues, as well as reevaluating tax planning strategies.
You’ll likely need to divide assets, and possibly determine support payments for children or spouses. An accountant can help you analyze how this will impact your financial health. This will be especially important for those finalizing their divorce after 2018. With the Tax Cuts and Jobs Act eliminating the alimony deduction moving forward, it is important to understand the real tax consequences of such payments in your divorce.
The birth of a child is not just a blessed event, it’s the beginning of a whole new set of tax breaks for your family. Your accountant can help make sure your taking advantage of every break possible and implement tax-saving strategies to save for your little one’s future.
If you’re expecting a grandchild, you may want to revisit your estate plan, establish a college fund or start a savings account for them. Each of these instances should be done with the help of a trusted CPA.
With the average annual cost of college coming in around $25,000 a year now, one can only image what it will be like ten years down the road. A 529 plan can be a great tax-advantaged way to save for your children’s or grandchildren’s college and it may offer surprising benefits related to wealth transfers. Your CPA can provide insight on how to benefit from the plan growing tax free.
For instance, recent tax reform laws now no longer limit the 529 plan funds to be used for colleges and university. You can use this money to pay qualified expenses up to $10,000 for private elementary and high school costs.
Buying or selling a home is one of the most significant financial transactions many individuals engage in. CPAs can guide different kinds of potential home buyers and sellers through the process and the myriad tax implications of home sales and purchases. They will consider items such as capital gains exclusions, rental home income, mortgage interest deductions and much more to help safeguard your financial wealth.
It goes without saying that a death of a spouse is an emotionally traumatizing time. And likely, the last thing on the surviving spouse’s mind is the tax issues needing to be addressed. Nevertheless, missteps can be costly and lead to additional stress. You can rely on your CPA’s knowledge to provide valuable assistance with income tax returns, estate taxes, retirement plans and much more.
With any investment sale will likely come capital gains tax, but timing can have a dramatic impact on tax consequences of investment activities. Proper planning with a CPA can ease some of the burden. They can help you understand each investment vehicle’s unique rules and tax implications, whether you’re buying or selling. Getting them involved before you make a move will most certainly save you dollars at tax time.
While none of us want to think about our parents passing, the natural progression of the circle of life often leads to us having to tie-up their financial lose ends after their death. A CPA can help you determine any tax liabilities associated with the estate or inherited assets, such as retirement plans. They can make sure you are taking advantage of a commonly overlooked tax benefit to heirs known as a step-up in basis, which will optimize inheritance, estate and capital gains tax liability. You can also rely on them to help file final accurate tax returns for the deceased and the estate.
Remember that all major-life changing events will likely affect your taxes in some way or another. Don’t forget to keep your accountant in the loop to help you avoid any unforeseen complications that may arise after the fact. If you are currently going through one of the above changes, contact Doeren Mayhew’s CPAs and tax advisors for assistance.
Want to reach the author? Email Jim O’Rilley or contact him at 248.244.3171.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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