Key Tax Filing Dates & Major Life Changes: What You Need to Know
The IRS typically opens the individual tax filing season in late January, with federal returns and extension requests due on April 15.
Employers and payers are required to deliver your W-2s and relevant 1099 forms by January 31 (or the next business day if it falls on a weekend). If you haven’t received yours by early February, reach out to your payroll department or payer promptly.
If you navigated significant financial shifts this past year — selling a property, receiving a raise, or experiencing a job transition — here is how to prepare.
1. Selling a Home: Understanding Exclusions and Taxes
- Capital Gains Exclusion (Section 121): If the property was your primary residence for at least two of the five years leading up to the sale, you can exclude up to $250,000 of profit from your taxable income ($500,000 if married filing jointly).
- Gains Above the Exclusion: Any net profit exceeding the exclusion threshold is subject to long-term or short-term capital gains tax depending on how long you owned the home.
- Capital Losses: Unlike investment property, a loss on the sale of a personal primary residence is not tax-deductible.
- 1031 Exchanges & Rollovers: Section 1031 exchanges apply strictly to business or investment properties, not personal primary residences. Additionally, the old pre-1997 tax rule allowing homeowners to “roll over” proceeds into a replacement home’s cost basis no longer exists. Primary home tax relief relies entirely on Section 121.
2. Promotions, Raises, and Bonuses
- Tax Bracket Impacts: An increase in income might move portions of your earnings into a higher marginal tax bracket. Remember, only the income within that higher bracket is taxed at the higher rate, not your entire income.
- Supplemental Withholding vs. Actual Liability: Bonuses are often withheld at a flat supplemental rate (typically 22% federally). If your actual top marginal tax bracket is higher, you could face an underwithholding shortfall at tax time.
- Update Form W-4: Submit an updated W-4 to your employer’s HR department to adjust withholdings and prevent surprise balances or penalties.
- Credit Eligibility: Higher earned income can phase out eligibility for certain credits, such as the Child Tax Credit or the Earned Income Tax Credit (EITC).
3. Job Transitions, Severance, and Unemployment
- Severance Pay: Severance is treated as ordinary taxable wage income and is reported on your Form W-2 alongside standard federal and state withholdings.
- Unemployment Benefits: Unemployment compensation is fully taxable as ordinary income on your federal tax return and is reported on Form 1099-G. If you did not opt for voluntary tax withholding while receiving benefits, you may need to adjust your current job’s W-4 or make estimated tax payments.
- Job Search Expenses: Under federal tax law, unreimbursed employee expenses — including resume prep and interview travel — are not deductible on federal returns.
- Healthcare Marketplace Adjustments: If you received a subsidy for health coverage via the ACA Marketplace while unemployed, reconcile your Advance Premium Tax Credit using Form 8962 on your tax return.
- Earned Income Tax Credit (EITC): Note that while earned wages qualify for EITC calculations, unemployment benefits do not count as earned income for EITC eligibility.
Tax situations vary based on state-specific laws and individual circumstances. Reach out to Huddleston Tax CPAs for tailored tax planning and filing assistance.