It finally happened. The kids are gone.Whether they headed off to college or were finally able to find a job that freed them from living in your guestroom, they’re out of the house. So is the dependent child tax deduction your enjoyed each year. You love your kids, but it wasn’t hard to enjoy the tax-related benefits of having kids under your wing either.
Your tax scenario has changed, and so it’s time to make some adjustments.
Here’s a look at some of the more common tax breaks available to empty nesters, or to anyone else who wants to ease the pain of a tax bill.
Maybe you have extra time on your hands and would like to donate time, money, or goods to charity. Great news: you can deduct a portion of your cash or non-cash donations. If you have to wear a uniform as part of your volunteer gig, you can also deduct the costs related to that uniform such as alterations and/or dry-cleaning.
Cleaning out your kid’s closet now that they’re gone? You can deduct a portion of the value of non-cash items including clothing and other goods.
Keep track of your mileage to and from your volunteer post; you can deduct a portion of your mileage.
Now is the time to grab that home office deduction if you haven’t done so already. Keep meticulous records of every related expense (e.g. utilities, supplies, equipment). If you’ve been able to ditch the 9-5 now that the kids are fully independent, self-employment does come with some serious tax perks.
You can also deduct vehicle expenses such as fuel, maintenance, and mileage if you use your vehicle in the course of conducting business. Of course, you’ll want to keep thorough records as you go along, since self-employed folks tend to be more visible to the IRS in terms of audit selection.
If you’re finally switching out your older household appliances in favor of newer, energy-efficient models, you may be able to claim a portion of their purchase an installation costs as a deduction. Keep all receipts, delivery records and any other documentation with your tax records.
If you maintain a second home, you can deduct the mortgage interest at the end of the year; you’ll find the interest figure on the 1098 form the lender will issue to you.
Consider adjusting your withholding allowance by updating your W4 form to increase the amount of tax witheld from your check. This tends to work best for low-to-moderate income taxpayers who typically receive a large refund. You’ll see less money on payday, but you could be saving yourself the headache of a tax bill if you adjust your withholding allowance to reflect your new household size.
Becoming an empty nester as the kids move out on their own is a significant life event, and along with that comes changes to your tax scenario. You can ease the pain of a possible tax bill by taking advantage of some tax deductions that you hadn’t considered before.
Always keep any receipts or records associated with your chosen deductions, so you can provide proof to the IRS if the need arises.
Of course, it’s always best to enlist a qualified tax pro to answer your specific questions regarding your specific tax-related concerns.