What do you consider a "large" tax bill? I owe $3,500 on my federal and state taxes this year, and this is peachy to me. I can earn a nice return on the money and it's not enough to get hit with a penalty. Unlike the money that is withheld, I can also pay it with a credit card and work towards minimum spend on the Chase Sapphire Reserve.
My strategy for 2017 is going to be to set a withholding of 10 allowances, and then assume that I'm going to pay about the same effective tax rate in 2017 as in 2016. I know this is going to put me behind, but I can calculate how much extra I need to withhold at the end of a quarter to catch up. So if I paid a 25% effective federal rate in 2016 but find out in April that I've only been withholding $2,000 less than 25% of my paycheck, I'll just increase my withholdings for a pay period or two. Hopefully that works as well as I think it will.
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I am finishing filing my taxes for 2016 and am getting a refund of about 7k. So happy I was able to give the government a interest free loan! I obviously do not want to do that again and was wondering how many allowances I should claim to avoid this in the future? To complicate things I just purchased a house and will be able to deduct my mortgage interest. I currently have 6 deductions in place. I have a wife and 3 kids.
I did a quick search on the IRS website and it recommended 15 allowances given my income, state taxes, mortgage interest, charitable contributions, 401k and HSA. I also do not want to have a large tax bill come tax time next year. Can anyone shed some light on their own experience or recommendations.
I'm in a similar situation and have found trial and error to be the best way to resolve this.
I went from a low # of allowances and getting a refund to a high # of allowances and having a large tax bill (I anticipated this and do have the money set aside already for this year)
My issue is that I will likely no longer fall under safe harbor rules next year and am trending down on the # of allowances again to hopefully find the right balance. (I'm OK this year as I've withheld > 110% of my taxes owed from last year. Don't think I will be seeing another jump in income like that again though which is why I need to adjust my allowances)Leave a comment:
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How many allowances should I claim?
I am finishing filing my taxes for 2016 and am getting a refund of about 7k. So happy I was able to give the government a interest free loan! I obviously do not want to do that again and was wondering how many allowances I should claim to avoid this in the future? To complicate things I just purchased a house and will be able to deduct my mortgage interest. I currently have 6 deductions in place. I have a wife and 3 kids.
I did a quick search on the IRS website and it recommended 15 allowances given my income, state taxes, mortgage interest, charitable contributions, 401k and HSA. I also do not want to have a large tax bill come tax time next year. Can anyone shed some light on their own experience or recommendations.
Leave a comment: