Taxes' Varying Role In Life's Moments 

Life is enough of a rollercoaster as it is, and things get even more complicated when you realize taxes are involved in almost all of life’s major moments. 

For better or worse, taxes and money are interwoven into all aspects of modern life, and we should prepare for this inevitability. While different life moments have different levels of impact on your tax situation, the good news is that there is always an opportunity to optimize and save some money along the way

Let’s do a deep dive on some of life’s most important moments and milestones, and just how those accomplishments impact your taxes. 

Life Moments: Career and Education Milestones 

Graduating | Tax-impact: Low 🟢

Whether it’s a bachelor’s or post-grad, nothing beats the taste of success alongside the bitter tang of student loans. Good news — Uncle Sam isn't crashing this graduation party too hard. Your tax impact is like that first job interview; low but promising.

Tax implications and considerations 

• Student loan interest deduction: Consider taking advantage of the student loan interest deduction to reduce your taxable income.

• Education credits: Explore potential education credits such as the American Opportunity Credit ($2,500 in total deductions) or the Lifetime Learning Credit ($2,000 in total deductions) to further alleviate the financial burden.

• Income bracket planning: As you step into the workforce, plan your financial decisions to stay within a lower tax bracket for optimal savings.

You get your first job after college | Tax impact: High 🔴

Welcome to the real world, where taxes are waiting at the doorstep. Your entry-level salary might make you rethink the meaning of "take-home pay," but don't worry, it gets better — eventually.

Tax implications and considerations 

• Major change: Getting your first full-time job is a major change on the tax side of things. Now, you'll be both making more than ever and paying more in taxes than ever. 

• Withholding adjustments: Ensure your withholding allowances are accurately set on your W-4 to avoid surprises at tax time.

• Emergency fund: Build an emergency fund to cushion the impact of taxes on your entry-level salary and ensure financial stability.

• Tax-advantaged accounts: Consider contributing to retirement accounts or health savings accounts (HSAs) to reduce taxable income.

Changing jobs or careers | Tax impact: Medium 🔵

New job, new opportunities, and a moderate tax impact. It's like rearranging the furniture in your life. You might stub your toe a few times, but the overall vibe is refreshing.

Tax implications and considerations 

• Rolling over retirement accounts: An alarming amount of employees leave their employer-sponsored retirement accounts behind. If changing jobs, consider rolling over your retirement accounts to maintain tax-advantaged status and avoid penalties. 

• Unemployment benefits: Understand the tax implications of any unemployment benefits you may receive during the transition.

• Job-related expenses: Keep track of job-related expenses, as some may be tax-deductible during a career change.

Getting a raise | Tax impact: Medium 🔵

Nice, that’s the sound of a pay raise. But beware, the tax man heard it too. It's a double-edged sword – more money in your pocket, but a decent chunk sliced off for the tax collector.

Tax implications and considerations 

• Tax-advantaged investments: Explore opportunities for tax-advantaged investments or retirement contributions to manage the increased taxable income.

• Tax planning services: Consider consulting with a tax professional to optimize your financial strategy with the additional income.

• Review deductions: Evaluate potential adjustments to your deductions to maintain a balanced tax liability.

Starting a business | Tax impact: High 🔴

Entrepreneurship: the adventure of a lifetime, tax-wise. Brace yourself for a high tax impact – you're not just building a business; you're funding the government, too.

Tax implications and considerations 

• Business structure: Choose a business structure wisely, as it will significantly impact your tax obligations.

• Business expenses: Keep meticulous records of business expenses for potential deductions and credits.

• Quarterly estimated taxes: Be prepared to make quarterly estimated tax payments to avoid penalties.

Going back to school later in life | Tax impact: Low 🟢

Back to the books, but fear not. The tax impact is a gentle nudge, like a wise professor guiding you through the complex world of education credits.

Tax implications and considerations 

• Education credits: Explore education credits like the LLC, AOC, and student loan interest deduction if you're pursuing further education, even later in life.

• Lifetime learning credit: Consider the Lifetime Learning Credit for continued education, providing tax benefits.

• Tax-free educational assistance: Check if your employer offers tax-free educational assistance, reducing your taxable income.

Life Moments: Family and Personal Milestones 

Buying a home | Tax impact: High 🔴

Homeownership might be seen as the pinnacle of adulting. The tax impact, though? It's like the property taxes: high and a constant reminder that you've entered a new realm of financial responsibility.

Tax implications and considerations 

• Mortgage interest deduction: Leverage the mortgage interest deduction to lower your taxable income. You are eligible to claim a deduction for the mortgage interest paid in the tax year on the initial $750,000 of mortgage debt for either your primary residence or a second home.

• Property tax deduction: Be aware of the property tax deduction to ease the financial impact of homeownership.

• Homebuyer credits: Investigate any available homebuyer credits or incentives for additional tax benefits.

Getting married | Tax impact: High 🔴

Two hearts become one, and so do your tax returns. The impact is high, reflecting the shared joys, responsibilities, and of course, the combined income that comes with the wedded bliss.

Tax implications and considerations 

• Filing status: Understand the implications of filing jointly or separately on your overall tax liability. In most cases, filing jointly doubles most of your standard amounts such as the standard deduction, income brackets, and more.

• Combined income considerations: Plan for potential changes in your combined income, as it may push you into a higher tax bracket.

• Reviewing deductions: Reevaluate your deductions and credits as a married couple to optimize your tax situation.

Having a baby | Tax impact: Medium 🔵

Your newfound bundle of joy brings not only extreme fulfillment and pride, but sleepless nights but also a moderate tax impact. Diapers and deductions — the true duality of parenthood.

Tax implications and considerations 

• Child tax credit: Take advantage of the Child Tax Credit for qualifying dependents.

• Child and dependent care credit: Explore the Child and Dependent Care Credit for eligible childcare expenses.

• 529 plans: Consider contributing to a 529 plan for your child's education, providing future tax benefits.

Retirement | Tax impact: High 🔴

The golden years finally arrive, and so does the high tax impact. Retirement might mean fewer work-related stressors, but the taxman still wants his cut of the golden pie.

Tax implications and considerations 

• Withdrawal strategies: Plan your retirement account withdrawals strategically to minimize tax implications.

• Social Security considerations: Understand the tax treatment of Social Security benefits during retirement.

• Healthcare costs: Prepare for potential high healthcare costs during retirement and explore tax-efficient ways to cover them.

Optimize and Plan For Life’s Biggest Tax Moments With Origin 

The list of possible tax situations you might find yourself in throughout life is long, and luckily, Origin is able to handle all of them. Origin members can file their taxes at no additional cost aside from their monthly membership, all while getting their maximum refund guaranteed. 

Regardless of your tax situation, you can file your federal and state taxes seamlessly right in Origin. Origin’s embedded tax filing solution is powered by Column Tax, an IRS-vetted filing software that comes with a 100% accuracy and maximum refund guarantee. The best part? Filing your taxes with Origin is free for subscribers, so there are no hidden upsells or fees and no limits on tax scenarios accepted. Click here to learn more about Origin Tax. 

Disclaimer:

Maximum Refund Guarantee. Column Tax will reimburse you for up to $250 if you are able to pay less federal or state income tax or receive a larger federal or state income tax return by using another tax return preparation provider. To be eligible for such reimbursement, the difference must be solely due to calculations, not due to entering any additional information or taking any different tax positions. To be eligible for such a reimbursement, you must file your federal (and if applicable state) income tax returns using the other tax preparation provider and must submit a copy of such return within sixty (60) days of filing via letter to 228 Park Ave S, PMB 22299, New York, New York, 10003, US or via email to support@columntax.com. You must also provide proof of payment for the other tax preparation provider and Column Tax will reimburse you for that amount (up to $250). Column Tax reserves the right to request additional information to support your claim that the other tax preparation provider calculated a lower tax liability or larger refund amount and that any such difference was not the result of different information.

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