Sometimes it is good to refresh yourself about the rules of the tax game, especially if you’ve been living in the fast lane. While visiting the Breckenridge Ski Resort and toying around with ideas about buying your own Breckenridge, Colorado real estate, take a peek at these tips.
Add buying or selling a home in Breckenridge to any kind of life change, and double check the impact on your taxes. Life changes include a change in marital status, the birth of a child, planning for a child’s college education, the death of a family member, the sale or purchase of a Breckenridge CO home or a second home, changing jobs, the decision to retire or to continue working, the sale of capital assets, and your charitable contributions.
Below is a general explanation of the effects of each of these changes.
1) Change in marital status. A marriage or divorce can alter the amount of a tax refund or balance due. Everything about your taxes will change depending on your filing status, including your tax rate, exemptions, and standard deductions.
2) Birth of a child. You must obtain a social security number for your child in order to claim that child as a dependent.
3) Planning for a child’s college education. Be sure to study the options with a knowledgeable person as the fine print may create a problem. Coverdell ESA and a Qualified State Tuition Plan are among the long list of tax-favored options.
4) Death of a family member. If there is an inheritance such as an IRA or pension plan, the options for taking distributions need to be weighed against the recognition of taxable income.
5) Sale or purchase of a home or second home. If you sell your primary home, the law allows for a generous exclusion for the profit that you make. As a married home seller, you can take up to $500,000 tax-free. For non-primary residences, there are no profit exclusions but the real estate tax and mortgage interest may be deductible.
6) Changing jobs. Check to see if your moving expenses are deductible.
7) Decision to retire or continue working. Social security benefits may be reduced depending on the age and amount of earned income. Benefits may be included in taxable income.
8) Sale of capital assets. Always find out the best time to sell off your assets. If you are in the 10 or 15 percent tax bracket, capital gain tax rates were 5 percent in 2007 but zero in 2008.
9) Charitable contributions. If you take the standard deduction, then contributions are not going to be additional tax deductions. Plan to group them in a year when you will be itemizing your deductions.
