Life Happens. Your Taxes Feel It.
Major life events aren’t just emotional they’re financial. Get married, have a kid, change jobs, lose a parent it all shows up on your tax return. And if you’re not thinking ahead, it shows up as money left on the table… or worse, a nasty bill you didn’t plan for.
Filing reactively waiting until April to sort things out is an expensive habit. Each year, Americans lose out on deductions, credits, and strategic timing opportunities simply because they didn’t bridge personal milestones with proactive tax strategy. The tax code isn’t designed to reward the passive.
Looking toward 2026, the IRS is preparing a landscape refresh: new contribution limits, reworked income brackets, and updates to long standing credits. What worked in 2023 might backfire in three years. This matters whether you’re a freelancer, a corporate employee, or a retiree shifting into RMD territory.
The bottom line: big life changes carry tax weight. You either carry it smart or pay for it later.
Getting Married or Divorced
There’s more to marriage or separation than what’s in the vows or papers. The IRS sees your relationship status as a tax status, and it changes how they treat your income, deductions, and responsibilities.
Filing jointly usually delivers a tax break compared to filing separately, thanks to wider brackets and access to more credits. But it also ties your liability to your spouse’s finances. If your partner underreports or owes back taxes, you can get pulled into the mess. On the flip side, married filing separately can cost you more in taxes but may protect you if there’s financial distrust or legal complications brewing.
Looking ahead to 2026, pay attention to the return of pre 2017 tax rules. The so called “marriage penalty” where two earners pay more filing together than as singles could hit middle income couples harder again. Brackets are expected to shrink, making planning even more critical.
Divorcing? Alimony payments used to be deductible for the payer and taxable for the recipient. Not anymore. Under current law, finalized divorces after 2018 carry no deduction or income reporting for alimony. That may turn what used to be a simple trade off into trickier legal negotiations. Settlements involving property and joint assets also carry long term tax consequences.
The takeaway: Tax strategy isn’t just about numbers it’s about timing, trust, and clear communication. Whether it’s syncing retirement contributions, splitting deductions fairly, or planning for income shifts, couples (or exes) should talk with a tax pro early especially in transition years like 2026.
Having a Child or Adopting
New dependents bring joy and new tax concerns. As of 2026, the Child Tax Credit isn’t disappearing, but it’s evolving. Expect caps to tighten and income phaseouts to kick in faster. The maximum credit per qualifying child is projected to fall slightly from pandemic era highs, which means lower dollar returns unless your planning is tight.
If you’re covering the cost of daycare or after school programs, the Child and Dependent Care Credit still matters. To qualify, both parents must be working or actively looking for work, and the provider can’t be a relative living in your household. Keep good records provider names, EINs, and receipts all count.
Adoption credits are still on the table for 2026, and they’re valuable up to several thousand dollars in non refundable credits, plus potential exclusions for employer provided benefits. You’ll need IRS Form 8839, detailed expense tracking, and ideally a tax pro who knows how to time the claim to split across multiple years if needed.
The easiest piece to forget updating your W 4. Parent or not, once you’ve got a new dependent, your withholding needs to reflect that. Most people wait until tax season to feel the changes in their refund or bill. By then, it’s too late. Adjust now, stay ahead.
Buying or Selling a Home
Housing decisions carry real tax consequences some beneficial, some misunderstood. As we look to the 2026 tax landscape, here’s what homeowners and buyers need to sort fact from fiction.
Mortgage Interest Deduction: Facts vs. Myths in 2026
The mortgage interest deduction is no longer the blanket tax break many think it is. With higher standard deductions set to stay in place (and likely adjusting for inflation), fewer taxpayers are itemizing their returns. If you don’t itemize, you don’t get this deduction full stop. For those who do pass that threshold, interest on up to $750,000 of mortgage debt is still deductible but only for primary residences and qualified second homes. Refinancing doesn’t reset that cap, and home equity loan interest is only deductible if the funds are used to improve the home securing the loan. No, buying a new flat screen doesn’t count.
Capital Gains Exclusions When Selling Your Primary Residence
This one’s still a clutch tax saver: up to $250,000 in gains ($500,000 if you’re married filing jointly) can be excluded if you’ve lived in the home two out of the last five years. But here’s the catch profits from hot housing markets can easily shoot above those limits. Watch your renovation investments and track basis adjustments (major home improvements can boost your cost basis). And make sure you’re meeting the occupancy test; partial use as a rental could reduce your exclusion.
Property Tax Strategies Especially in High Cost Regions
Even with the SALT (state and local tax) deduction cap still stuck at $10,000, there are ways to make your property taxes work harder. Prepaying taxes before year end can help time your deduction if you’re itemizing. And in states with high property tax burdens, appealing your assessment isn’t just for the squeaky wheels it can translate to real savings. Your assessor’s records aren’t always right. Challenge them if needed.
Energy Efficient Upgrades Can Trigger Serious Tax Credit Wins
Forget minor perks 2026 continues to offer real dollar for dollar tax credits on energy efficient improvements, thanks to the Inflation Reduction Act’s extended provisions. Upgrades like heat pumps, solar panels, and new insulation might qualify. These aren’t just deductions they’re credits, which directly reduce what you owe. Stack federal credits with local utility rebates, and you could be looking at thousands in savings. Translation: it’s not just good for the planet. It’s good for your tax bill, too.
Starting a New Job or Losing One
Your job changes, your tax story changes. If you’re stepping into a higher salary, adjust your W 4 immediately don’t let the IRS surprise you next April. The extra money might feel good now, but if your withholding doesn’t keep pace, you’re setting yourself up for penalties or a nasty bill. On the flip side, dropping to a lower income? Update that W 4 too you might be overpaying.
If you’re exiting a role, severance pay gets taxed just like regular income. Unemployment benefits? Mostly taxable as well. Don’t assume you’re off the hook set aside a portion as if it were a paycheck. The IRS certainly treats it like one.
For side gigs and freelance work, get cozy with quarterly estimated tax payments. No one’s withholding for you anymore. And track everything income, expenses, mileage because 1099s are raw numbers, not curated for your benefit. Miss a few write offs, and you’ll feel it.
If you’re in flux, health savings accounts (HSAs) and retirement contributions might seem low priority, but they can be your best tax shelters. Even part year contributions can help lower your adjusted gross income and pad your future. Doesn’t matter if you’re mid transition every dollar you funnel into these accounts counts.
Bottom line: salary jumps, job losses, and freelance pivots aren’t just career changes. They’re tax events. Treat them like it.
Retirement, Inheritance, or Major Investment Events
Major financial changes in later life often overlap with some of the most complex areas of the tax code. Whether you’re entering retirement, receiving an inheritance, or making significant investment decisions, strategic planning can reduce your long term tax bill and avoid surprise liabilities.
Required Minimum Distributions (RMDs) in 2026
If you’re turning 73 in 2026, it’s time to start RMDs for retirement accounts like traditional IRAs and 401(k)s. Missing these mandatory withdrawals can trigger a steep penalty from the IRS.
RMDs begin at age 73 (based on current updates scheduled for 2026)
Applies to traditional IRAs, 401(k)s, and other non Roth retirement plans
Penalty alert: Missing an RMD can mean a 25% excise tax on the amount not withdrawn
Smart Withdrawal Strategies
Taking money out of your retirement accounts strategically can help you avoid jumping into a higher tax bracket or losing eligibility for tax credits.
Spread out withdrawals to minimize marginal tax increases
Sequence your income: Consider using Roth accounts first if your taxable income is already high
Watch for Medicare surcharges, which can be triggered by higher reportable income from large account draws
Inheritance: What to Know About Taxes
Receiving assets doesn’t always mean paying taxes but misunderstandings here can be costly.
Stepped up basis means inherited assets are revalued at their fair market value at the time of inheritance, reducing capital gains if sold
Estate tax exclusions are projected to be lowered after 2025 under current law, the exemption per individual may drop significantly
Track estate changes if you’re an executor or planning your own
Inherited IRAs: Must generally be emptied within 10 years if you’re a non spouse beneficiary
Selling Stocks, Crypto, or Other Investments
Big investment gains can mean big tax hits unless you plan ahead.
Short term vs. long term capital gains: Assets held under 12 months are taxed at ordinary income rates
Tax loss harvesting can help offset gains when done intelligently near year end
Crypto investments follow capital gains rules but lack some of the tax loss harvesting benefits
Proper recordkeeping is essential: missing cost basis info can inflate your tax bill
Key Takeaway: Retirement and large financial shifts need more than assumptions. Work with a tax advisor who understands timing rules and strategy layering to protect your income and legacy.
Tax Planning Shouldn’t Wait
A lot of people overpay their taxes. Not because they messed up on purpose, but because they didn’t think ahead. Life moves fast marriage, kids, job changes, inheritances and the tax code has its own reaction to each of those. Miss the window to act, and you’ll end up giving away money you didn’t need to.
Too many folks only call their CPA when it’s time to file. By then, the best options are already off the table. Smart planning means staying in touch before life events happen. Even a short check in can mean the difference between a five figure bill and a refund. Adjusting withholdings, shifting investments, utilizing credits all of that works best if you act during the year, not after it ends.
If you want to go deeper into why timing matters and how to get ahead of it, check out Why Tax Planning Should Be a Year Round Effort. It’s not about being perfect it’s about being proactive.
Stay Ahead, Not Behind
Life moves fast tax law moves faster. If you’re not tracking major life changes as they happen, you’re setting yourself up for a surprise from the IRS, and not the good kind. Got married? Had a baby? Started a side hustle or sold your house? These moments all echo through your tax return, and the sting often comes months too late.
The smart move is to keep tabs on changes in your life and in tax law. The IRS is set to roll out sweeping adjustments in 2026 including new bracket thresholds, credit limits, and deduction rules. These aren’t small tweaks. They will shape how much you owe or get back.
Avoiding tax shocks doesn’t mean obsessing over every update. It means checking in at key moments after a major life move or before year end so your financial choices line up with coming changes. Tax planning isn’t about theory. It’s about staying ready for what’s next.
In short: Treat major life events like tax events. Because they are.
