Effects of Recession Still Showing in Tax Season
Almost three years later, Americans' tax returns still show scars from the Great Recession
Thanks to a deep recession and agonizingly slow recovery, the concept of a "normal family structure" has a completely different connotation than it did before. These days, it's not uncommon for an adult child to move back in with their parents or an elderly parent to live with their children for financial reasons.
That enduring legacy of the Great Recession continues to pop up during tax season, experts say.
"You have all these different, changing situations and questions surrounding whether you can claim someone as a dependent [for tax purposes]," says
Questions also arise when it comes to the fallout of the high unemployment rate.
"You see a lot of people who have been on unemployment or have changed jobs," Kirkendall adds. "When you look at moving expenses if you move for a job, or job search expenses, there's a lot that can be deductible that people shouldn't forget about."
Going back to school because of job loss can also score you a tax deduction, and related expenses such as childcare or summer camp can be knocked off your taxable income. The bottom line is, even if you have been adversely affected by the recession, there are some tax benefits that can help ease the pain.
One tax quirk consumers should watch out for involves dipping into 401(k) investments. That chunk of change can look quite appealing, especially to help cover expenses after a job loss. But borrowing from your 401(k) could have unintended consequences and cost you more when it comes to your year-end tax bill.
"People have lost their jobs and they're taking money out of their retirement to cover bills while receiving other income such as social security," says
That increased taxable income on top of the penalty many retirement funds charge to withdraw money early could make the extra money to shore up household finances more expensive than consumers originally thought.
"You see situations where [consumers'] social security was once not taxable, but with the added income [from retirement funds], it puts them over a certain limit where it's taxable," Greene-Lewis says. "So you're seeing that as a result of the economy."
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Personal Finance - Effects of Recession Still Showing in Tax Season
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