Many of the events that happen in your life, both to you and your family, are events that will have some type of impact on your taxes. Therefore, keeping up with the new tax laws can make filing your tax return much easier and help ensure you don't miss out on certain deductions.
Two key areas of particular interest for making sure that you take advantage of all family-related tax breaks involve life changes and determining just whom you can claim as a dependent.
Married filing jointly: Remember, your tax status for the entire year is determined by your marital status on Dec. 31 of that year. For 2007, that's Dec. 31, 2007.
In a family way: You can deduct a number of medical expenses as they pertain to the expansion, or even delay, of your family. Deductions include fees paid for childbirth preparation classes, certain fertility enhancement procedures, birth control pills and/or legal operations to prevent having children.
What's in a name? Spouses who change their last name should notify the Social Security Administration as soon as possible. Whether you are a bride changing to your husband's last name or you are in a same-sex partnership, failure to report name changes could lead to complications at tax time.
After the love is gone: If your divorce is officially recognized as effective on or before Dec. 31, then you are considered divorced for the entire year, which may enable you to claim certain benefits associated with filing as single or as a head-of-household, if you qualify.
Filing separate returns: Even though filing a joint return might make a couple feel even closer, it may not be your best option from a tax perspective. For example, if one spouse has large medical expenses or employee business expenses but lower income than the other, filing separate returns may result in a lower overall tax liability. Run the numbers both ways to determine which is better.
You move me: If you meet certain requirements, you also may be able to deduct the cost of packing, crating and transporting your household goods and personal items to your new home, as well as the cost of disconnecting and connecting utilities and shipping your car or household pets.
Once you have established your new situation, take a look at your dependents. Your loved ones may depend on you for support and advice, but do they meet the dependency test? Following is an overview of dependents' qualifications and the ensuing tax implications for the 2007-filing year.
Consider the definition of a "qualifying" child dependent:
--A son, daughter, stepchild, eligible foster child, sibling or their descendent that resides with you for more than six months a year.
--The child must be under age 19 or a full-time student under age 24. Age is not a consideration for a permanently disabled child.
--The child does not provide more than half of his or her own financial support for the year.
If not a qualifying child, a dependent could also be a qualifying relative, regardless of age. The notable differences are:
--The person does not have to live in your household if he or she is an approved relative such as a parent or sibling.
--The person's gross income must be less than $3,400 for the year, and you must provide over half of his or her overall financial support.
The amount you can deduct for each qualifying dependent in 2007 is $3,400. High-income taxpayers may see their deduction trimmed, depending on their income and filing status.
Don't forget to include what you paid for your dependents' medical and dental costs to determine whether you hit the threshold of 7.5% of adjusted gross income for claiming medical expenses. You might be entitled to a break from those growing college bills by receiving up to a $4,000 adjustment to your gross income for their tuition and related expenses.
Tax laws can be complicated, so you should consult the IRS Web site or your tax adviser for more information.
Greg Rosica is a contributor to the Ernst & Young Tax Guide 2008, and he is a tax partner at Ernst & Young in Tampa, Fla.