June 2026 – Life Changes & Taxes

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June 2026 – Life Changes & Taxes

OVERVIEW

Major life changes can significantly impact your tax situation, sometimes in ways that create tax saving opportunities and other times in ways that require careful planning.

As we are moving through 2026, we would like to highlight various common life events and what they could mean for your tax situation.

Included within this newsletter are links to IRS guidance on related topics. If you have further questions, please feel free to review these resources and reach out to us with any questions. IRS Guidance – Managing your taxes after a life event.

COMMON LIFE EVENTS

Growing Your Family

  • Welcoming a child – whether by birth or adoption – may make you eligible for valuable tax benefits, including the Child Tax Credit, Dependent Care Credit, and potential adjustments for your filing status. Be sure to obtain a Social Security number for your child as soon as possible. Please note these credits are subject to high-income phase-outs.

Education Expenses

Marriage or Divorce

  • A change in marital status can affect your filing status, tax brackets, and eligibility for certain deductions and credits. If you were married or divorced during the year, your status as of December 31st will determine how you file.
    • Alimony can have different tax treatment depending on when the divorce or separation agreement was executed. After 2018, alimony is generally neither deductible by the payer nor includible in income by the recipient.

Buying or Selling a Home

  • Homeownership can bring deductions such as mortgage interest and property taxes. If you sold a home, you may qualify to exclude a portion of the gain from income – but timing and usage requirements may matter.

Moving States or Multi-State Income

  • Relocating or earning income across state lines can trigger additional filings and complex tax rules. You may face part-year residency and/or nonresident returns.
  • Each state has different filing requirements and taxation, if you moved states or believe that you have income attributable to a different state, we can assist with planning.
    • Other state tax credits
      • If it is the year of a move from one state to another, your state taxes will be allocated based on the time of residency in each state. The taxes paid in each state will be a credit on the other state tax return.
      • The credit is limited to the lesser of the tax imposed by the other state on the qualifying income or the resident-state tax attributable to that same income.

Career Changes or New Income Streams

  • Starting a new job, launching a business, or picking up freelance work can change how and when you pay taxes. Self-employment income may require estimated quarterly tax payments to avoid penalties.
  • Job Loss, Severance & Unemployment Benefits:
    • A job loss can create several tax considerations beyond regular wages. Severance pay, accrued vacation, PTO payouts, bonuses, and unemployment benefits are generally taxable income and may not have sufficient withholding applied.
    • In many cases, withholding on unemployment benefits is optional or applied at a flat rate that may not fully cover the tax liability. As a result, adjustments to withholding or estimated tax payments may be necessary to avoid unexpected balances due or underpayment penalties.

Investments and Real Estate Activity

  • Selling investments or investment real estate property may trigger capital gains taxes. Proper planning can help manage the tax impact and potentially reduce what you owe.
  • Cancelled or forgiven debt can create unexpected taxable income, even when no cash is received (Ex. Foreclosure, settlement with a lender, varying student loan discharge rules, etc).

Health Changes

  • Major medical expenses, changes in insurance, or contributions to Health Savings Accounts (HSAs) can all impact your tax return.

Retirement and Estate Planning

  • Contributions to retirement accounts may reduce your taxable income. Additionally, gifts to family members or charitable contributions may have tax implications worth planning for in advance.

Turning Age 65

  • Enhanced senior deduction – additional deduction of up to $6,000 per eligible senior, or up to $12,000 on a joint return if both spouses qualify. This is available to both itemizers and non-itemizers, but married taxpayers must file jointly.
    • This deduction begins to phase out when MAGI exceeds $75,000, or $150,000 for joint filers.
  • Additional standard deduction – 2026
    • Single or head of household: $2,050 increase for individuals aged 65 or older.
    • Married filing jointly or married filing separately: $1,650 per spouse aged 65 or older.
  • Medicare & Health Savings Accounts
    • Turing 65 also generally triggers Medicare eligibility, which can impact Health Savings Accounts (HSA) contribution eligibility.
    • Once enrolled in any part of Medicare, taxpayers are no longer eligible to make HSA contributions (existing HSA funds can still be used).

Death of a Spouse

  • In the year of death, a surviving spouse may generally still file jointly. In subsequent years, filing status may change to Qualifying Surviving Spouse (if applicable) or Single, which can materially impact taxable income thresholds, Medicare premiums, capital gain exposure, and overall tax liability.
    • Life insurance proceeds are generally excluded from federal taxable income; however, estate inclusion may apply depending on policy ownership and beneficiary structure. Inherited assets may also receive a step-up (or step-down) in basis to fair market value as of date of death, which can significantly affect future capital gains recognition.
    • Coordinating beneficiary designations, titling, and post-death elections is critical to preserving available tax benefits and minimizing unintended consequences.

 

WHY THIS MATTERS

Many of these events create planning opportunities – but only if we know about them in advance. A quick conversation now can often aid in later tax planning.

If you have experienced, or expect to experience, any major life changes this year, we encourage you to reach out. We are here to help you make informed decisions and stay ahead of your tax obligations.

Included with this newsletter, we have provided a Quarterly Tax Check-In checklist. We encourage you to review this checklist and see if any of these questions may apply to you. If you believe that they do and have questions on how to address the tax implications, please feel free to reach out to us to discuss any possible tax planning techniques.

 

QUICK TAX CHECK-IN (QUARTERLY)

Life Changes

  • Did I get married, divorced, or have a child?
  • Did anyone become a dependent (or no longer qualify)?
  • Am I paying for childcare or dependent care that may qualify for credits?
  • Did I or my spouse turn 65 during the year?

Income & Work

  • Did I change jobs, receive a raise/bonus, or start a side income stream?
  • Am I earning income without taxes being withheld?
  • Did my income significantly increase or decrease this quarter?
  • Did I receive severance pay, accrued vacation pay, and/or unemployment compensation?

Home & Investments

  • Did I buy or sell a home or other property?
    • Was the purchase of a home in another state?
  • Did I sell investments or realize significant gains?
  • Did I place a property into service this quarter?
  • Did I have any debt cancelled or forgiven during the year?

Business & Self-Employment

  • Did I purchase significant equipment or assets for my business?
  • Did I hire employees or independent contractors?
  • Have I reviewed my bookkeeping for accuracy this quarter?

Education & Health

  • Did I pay for college or education expenses?
  • Did I have large medical expenses or change insurance coverage?
  • Can I contribute to an HSA?

Planning Opportunities

  • Am I on track with retirement contributions?
    • Should I maximize retirement contributions?
  • Should I adjust withholdings or estimated payments?
  • What charitable giving strategies make sense this year?
    • Should I group charitable contributions every other year?

If you have any questions, please do not hesitate to reach out to us!