Taxes are one of the certainties of life, the old saying goes. But how much you pay in taxes will change depending on factors like where you live, the makeup of your household and how you save.
The following common life events may affect your tax bracket, open new doors for tax savings or otherwise change how much you owe each year. Keep reading to see what might affect you.
1. Your First Job
For most people, their first job represents their first brush with taxes. It may come as a surprise to see how much is withheld through payroll deductions, and the following spring will be a new worker’s first experience filing a tax return.
A first job also provides opportunities to save on taxes. Even teens can begin saving in a 401(k) or IRA once they have earned income.
A traditional retirement account allows contributions to be deducted and thus reduces taxable income. Or use a Roth account to save for tax-free income in retirement.
2. Marriage
Getting married may be the most common life event people associate with tax changes.
“One of the best financial decisions you can make is to get married,” according to Daniel Razvi, tax attorney and senior partner with Higher Ground Financial Group, which serves clients nationwide. “The tax code favors married couples.”
For instance, in households in which only one spouse works — or in which one person has a significantly higher income than the other — they will likely be in a lower tax bracket if they file jointly as a couple than if they each filed single returns.
Married couples also have higher standard deductions and higher thresholds for other deductions and credits compared to those filing returns as single taxpayers.
[Read: Married Couples: Is It Better to File Taxes Jointly or Separately?]
3. Addition of a Child
The birth or adoption of a child also changes a family’s tax situation.
“People think maybe I’ll be getting a tax credit and that’s it,” says Dann Ryan, managing partner at financial firm Sincerus Advisory in New York City.
The child tax credit and child and dependent care credit are the most common child-related credits. Family size also plays a factor in determining if and how much a household can receive for an earned income tax credit and premium tax credit. The latter subsidizes health insurance purchased through the government marketplace.
However, there are other savings opportunities.
“We see a lot of business owners who employ their children,” Ryan says. That has the dual benefit of a business deduction along with earned income for a child, which can then be saved in a tax-advantaged retirement account.
4. New Employment
A different income can mean a change in tax brackets, but that’s not the only tax implication of new employment.
“A new job can have new complexities,” Ryan says. Workers may have access to new benefit options, such as stock rewards, that could be subject to different tax treatment. Or if they work in multiple states, they may have to juggle the tax requirements of several jurisdictions.
Unemployment also affects someone’s taxes. Having a lower income means this might be a good time to complete Roth conversions for retirement accounts or realize capital gains. Doing so during a low-income year could minimize how much you owe in taxes on those transactions.
5. Purchasing a Home
Buying a home may open the door to itemizing deductions on a federal tax return. Mortgage interest and property taxes are the largest expenses that many taxpayers can itemize.
However, the Tax Cuts and Jobs Act of 2017 capped the deduction for state and local taxes at $10,000. For those living in high-cost areas, that meant they could no longer deduct a large portion of their property taxes.
“When that was reduced to $10,000, it’s almost nothing for our clients,” says Morgan Mazor, partner with law firm Bender and Crane in New York City.
Most provisions of the Tax Cuts and Jobs Act sunset in 2026 though, and Mazor says she has heard some talk that the cap on state and local taxes may be expanded at that time.
[Read: The Pros and Cons of Standard vs. Itemized Tax Deductions]
6. Getting a Divorce
Getting married affects your taxes, and so does getting divorced. It shifts taxpayers from the married filing status to the less-favorable single taxpayer status, although if children are in the household, a parent may be able to file as a head of household.
What’s more, marital assets may need to be sold as part of the divorce proceedings, resulting in a tax bill for some investments. That can come as a surprise for some ex-spouses.
“They may not realize that the amount in an account isn’t net,” Mazor says. As a result, some people may walk away from a divorce with less money than they expect.
[Read: Financial Steps to Take Before, During and After Your Divorce.]
7. Moving to a New State
While taxpayers are often focused on federal taxes, states and local jurisdictions have their tax laws and collections. When someone moves, they may be subject to new filing and payment requirements.
Consulting with a tax or finance professional after moving can be a good idea to sort through what your new home requires in terms of taxes.
“Too many times, in my opinion, people try to resolve their issues with Professor Google or Dr. Yahoo,” says Derek Miser, chief managing member of Miser Wealth Partners LLC in Knoxville, Tennessee. However, online information can be incorrect, misleading or open to misinterpretation.
8. Receiving an Inheritance
The death of a relative can also have tax implications. If someone was wealthy enough, the family may owe an estate tax. But with the current estate tax exemption of $13.99 million in 2025, few people will find themselves in a position to pay that.
“The bigger impact is when there is a windfall of money coming in,” Miser says.
Life insurance proceeds aren’t taxable, but other assets are.
For instance, if someone other than a spouse inherits a traditional IRA, they will need to take required minimum distributions (RMDs) each year if the decedent had already started them and deplete the account balance within 10 years. Those annual distributions can add up to a hefty tax bill.
9. Retiring
How workers save for retirement can dramatically impact how much they pay in taxes later in life.
“I think a lot of people really do not fully appreciate the hard position that having a traditional 401(k) or IRA can put you in,” Razvi says.
Traditional retirement accounts are funded with pretax dollars, and withdrawals are subject to income tax in retirement. At age 73, retirees must begin taking required minimum distrubions, also called RMDs, each year, even if they don’t need the money. Not only is that money taxable, it could be enough to make a portion of someone’s Social Security benefits taxable too.
On the other hand, Roth retirement accounts are funded with after-tax dollars so distributions don’t add to one’s taxable income in retirement. And there are no RMDs associated with these accounts.
10. The Death of a Spouse
The death of a spouse can result in something known as a widow’s penalty, according to Keith Fenstad, vice president and director of wealth planning at Tanglewood Total Wealth Management in Houston.
Just like after a divorce, a widowed spouse will see their tax-filing status eventually switch to single two tax years after the spouse’s death. As a result, they may find they are in a higher tax bracket and pay more federal tax even if their income is lower.
“We talk about doing some Roth conversions to minimize the impact of that,” Fenstad says, noting that RMDs often contribute to the problem.
Throughout life, common events can affect your tax situation. Understanding how each may change how much you pay can help you identify strategies that will help you save in the long run.
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10 Common Life Events That Can Impact Your Taxes originally appeared on usnews.com