Are you planning to change careers? One important element of a successful change like this is to learn how it might affect all areas of your life so you can prepare — mentally, educationally, and financially. One area many people overlook during a big life change is income taxes. How can changing your career as an adult affect your tax bill? Here are a few things to know.
1. New Industries Have New Deductions
Your new career might bring new opportunities for job-related and ownership-related deductions. While many employee expenses are no longer generally deductible, others merely change.
For instance, a taxpayer who will be taking up work in certain travel-related industries can claim a different daily amount for meals than other industries. Similarly, a home-based worker might be able to add the home office deduction on their personal return.
2. Education Brings Tax Credits
One important way to help pay for the education you often need to switch to a new career is through tax credits. A variety of tax credits and deductions are available to help students, including the American Opportunity Tax Credit and Lifetime Learning Credit. If you take out student loans, you will also have access to the Student Loan Interest Deduction.
But all of these tax credits have their own set of rules you must follow to claim them. You'll need to learn these rules upfront to avoid later surprises.
3. Income Changes Affect Taxes
How will your income change in the short term and the long term? In the near future, you may bring in less money if you return to school full-time or if a job loss has supercharged your career change plans. Lower-income generally means a change in your income tax rates and existing tax credits. It may also qualify you for new tax credits, such as the Saver's Credit or Earned Income Tax Credit.
Hopefully, you'll have a higher income once you get your career on track, so you'll need to plan how to minimize any increase in your tax rates. Tax reduction strategies usually require advance planning, so they can't all be accomplished if you wait to plan until the tax bill is due.
No matter what direction your career change is taking you, meeting with a tax preparation service now can help. They will help you analyze the near-term effects of your decision and understand future implications. Learn more by researching tax preparation services near you. Need help getting started? Visit this link http://www.tri-check.biz.