The article highlights potential tax traps that could lead to unexpected bills taxpayers may confront. It outlines how home office deductions can result in tax liabilities when selling a home, particularly if the office space has been depreciated. Additionally, it points out that as children age, valuable tax credits, such as the child tax credit, may diminish, creating further financial surprises during tax season. These nuances emphasize the need for taxpayers to remain vigilant about their deductions and potential consequences when filing taxes.
When you sell a home you've been living in for at least 2 of the past 5 years, you may qualify to exclude from your taxable income up to $250,000 of profit from the sale of your home if you're single or $500,000 if you're married.
If you claim depreciation on your home office, this could add even more to your tax surprise. This added tax hit courtesy of depreciation surprises many unwary users of home offices.
As your children grow older, many child-related deductions fall off, creating an unexpected tax bill. This transition does not happen all at once.
One of the largest tax deductions your children can provide you is via the child tax credit. If they are under age 17 on December 31st, you could get up to $2,000 for that.
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