17 Tax Filing Strategies for Women Navigating Life Changes

Marriage, divorce, new jobs, childbirth, and health issues—these life events all affect your tax return. Here are practical tips to consider.

We've all faced unique challenges this year, not just the pandemic. Whether it’s a joyous occasion or a tough situation, each can impact your tax filing.

If you experienced any unusual circumstances in 2021—and let’s be honest, many of us did—here’s what to keep in mind as you prepare to file.

IMPORTANT DATES FOR 2021 TAXES:

Still need more time? File an extension using Form 4868 by April 18, allowing until October 17, 2022, to file. Note: This extension is for filing only, not for payments. If you owe taxes, pay by April 18 to avoid penalties. Check your state tax agency for their deadlines.

If You Lost Your Job

The American Rescue Plan Act of 2021, enacted on March 11, 2021, provided tax relief measures for many households.

This plan extended unemployment benefits at both state and federal levels until Labor Day 2021. Remember, unemployment benefits are taxable income, unlike stimulus payments.
If you received unemployment in 2021, you should have a 1099-G form detailing the total amount received and taxes withheld.

It may feel unfair to pay taxes on unemployment, but it’s essential to file by April 18, even if you can’t afford to pay. Work with the IRS to set up a payment plan.

If You Withdrew from a Retirement Account

The CARES Act allowed withdrawals of up to $100,000 from retirement accounts without penalties for those who needed cash. However, you must report one-third of that withdrawal as income during the three years following the withdrawal.

If you repay the amount within that time, you can amend your tax return to reclaim any taxes paid. Be aware that the tax implications are ongoing.

If Your Relationship Status Changed

A shift in your relationship status can necessitate a new tax filing status, which impacts your tax rate and deductions.

Your status as of December 31, 2021, governs which filing status you can choose. Here are some points to consider:

Marriage

If you tied the knot in 2021, you might benefit more from the “married filing jointly” status than “married filing separately,” according to CPA Ross Riskin of The American College of Financial Services.

However, if both partners earn high incomes, filing jointly could push you into a higher tax bracket. Also, if you have student loans, filing separately may lower your monthly payments by isolating income, but this could lead to higher taxes overall.

Divorce

For those who divorced in 2021, alimony is no longer taxable for the recipient or deductible for the payer due to the Tax Cuts and Jobs Act of 2017. Your filing status as of December 31, 2021, will influence how you file.

Custodial parents typically claim children as dependents, but it’s common to alternate this between parents. In 2021, the child tax credit increased to $3,600 for kids under 5 and $3,000 for kids 6 to 17. This credit will revert to $2,000 per child in 2022.

Death of a spouse

If your spouse passed away in 2021, you can still file jointly for that year. Afterward, you may qualify for the qualifying widow status, allowing you to double the standard deduction for two years if you have a dependent child.

You filed jointly the year your spouse died.
You didn’t remarry that tax year.
You have a dependent child.
You cover more than half of your household expenses.

When selling inherited property, you benefit from a step-up in basis, lowering capital gains taxes compared to selling while your spouse was alive.

If you added or lost dependents

Welcoming a new child, adopting, or sending a child off to college impacts your dependent claims on your tax return.

Adding dependents

The American Rescue Plan Act raised the child tax credit significantly. If you received advance payments, report the total on your tax return, which you should have received via Letter 6419.

Blended families may qualify for the Family Tax Credit, worth up to $500 per qualifying child.

Stimulus payments also apply based on income thresholds. Eligible singles can receive full payments if earning up to $75,000, while couples can earn up to $150,000. The last payment in March 2021 provided $1,400 per dependent of any age.

If you had a baby in 2021, you likely qualify for the child tax credit as long as you’re a U.S. resident.

Caring for family members

If you care for an elderly relative or someone with special needs, check if you qualify for the Dependent Care Credit or the Credit for Other Dependents. Unused Flexible Spending Account funds from 2021 can carry over to 2022, pending employer approval.

Adoption

Finalizing an adoption in 2021 may qualify you for up to a $14,440 tax credit based on your modified adjusted gross income. Note that this credit does not apply to stepchildren but is available to grandparents adopting grandchildren.

Empty nesting

If your children moved out in 2021, update your withholding (Form W-4) to avoid surprises at tax time.

If you re-entered the workforce or started a side hustle

Whether you launched a side business, returned to work, or retired, be prepared for tax changes.

If your household income changed, reassess your W-4 filing. Under-withholding can lead to unexpected tax bills.

If you worked part of the year or had a low income, understand the Earned Income Tax Credit (EITC) eligibility requirements. Use the EITC Assistant on the IRS website for estimates.

If you started a side hustle, know that you’re responsible for all taxes as a 1099 worker. While your employer deducts taxes for W-2 employees, you must handle your own taxes if you earn via gig work. You can deduct business expenses, even if you don’t itemize (see Do I Have to Pay Taxes on Side Hustle Income?).

If you run a home-based business, check for eligibility for the home office deduction—up to $5 per square foot for business space. Keep all receipts for business-related purchases to claim deductions.

If you worked from home as an employee, you cannot claim home office expenses unless you have 1099 income. Attempting to do so may trigger an audit.

Maintain thorough records, especially if you have:

Variable income (e.g., salary plus commissions)
Multiple income sources (side gigs)
Your own business

If you retired in 2021, be cautious about claiming Social Security before reaching full retirement age to avoid a reduction in benefits. Working while receiving benefits can also lead to tax implications, so be aware of earnings limits.

If You Experienced a Significant Health Crisis

The pandemic impacted our health systems, but other health issues can also lead to tax complications. Be aware of potential deductions related to medical expenses on your 2021 return.

In 2021, you can deduct unreimbursed medical expenses exceeding 7.5% of your adjusted gross income (AGI). This threshold has been lowered from 10% in previous years. Adjusting your filing status may help reach that threshold.

If you are disabled and qualify under the IRS definition, you might claim a larger standard deduction and deduct necessary work-related expenses related to your disability.

If You Celebrated a Milestone Birthday

If you turned 50, the IRS allows catch-up contributions to retirement accounts. You can contribute an additional $1,000 to an IRA, increasing the maximum to $7,000. Don’t forget that for 2022, you can add $6,500 to employer-sponsored plans.

If you turned 70 ½, you must start taking required minimum distributions (RMDs) from retirement accounts, or face a 50% penalty on missed withdrawals. RMDs are mandatory each year post-70 ½ (see the IRS RMD table for details).