Thoughts on changing withholding for 2018? Complicating factors!

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BuckyBadger
Posts: 755
Joined: Tue Nov 01, 2011 11:28 am

Thoughts on changing withholding for 2018? Complicating factors!

Post by BuckyBadger » Fri Feb 23, 2018 9:40 am

I just got my first paycheck showing a decrease in my federal taxes and I was hoping to get some expert opinions on if I need to change anything to try and get closer to even when it comes time to pay 2018 taxes.

Here's the situation:

We're a DINK family with high incomes so we always set our exemption number to zero and also I had $450 extra withheld every month. Doing this usually kept us within +/- $1000 between state and federal come tax season.

We itemized deductions previously, but without state income tax and charitable contributions being deductible any more I project that we'll be taking the standard deduction of $24k this year. (Used to get up to about $30k in itemized deductions.)

And just to add one more complication factor, we're expecting our first kid in September, so 2018 taxes will have us with a dependent. I understand there is a child tax credit, but frankly I'm not sure what else changes with our taxes when the Nugget hits the ground! (ETA, actually maybe we make too much to claim this credit? I'm actually not even sure...)



SO - if we don't want to get hit with a big tax bill (or a big refund, although I'm more worried about ending up owing thousands right as we also get to begin paying $1500 a month for day care!!) in the beginning on 2019, is there anything that you guys think we should do? Increase by extra $450 withholding? Decrease it? Change my exemption? My stuff is easy to change online and my husbands is difficult, so I try to do any tweaking within my own side, but I can change his too, if necessary.

Thanks for any comments! Happy to add any more information that might be helpful!

BuckyBadger
Posts: 755
Joined: Tue Nov 01, 2011 11:28 am

Re: Thoughts on changing withholding for 2018? Complicating factors!

Post by BuckyBadger » Fri Feb 23, 2018 11:29 am

Yikes - I guess this is either a really hard question or a really dumb one!

Or just perhaps still too many unknowns...

not4me
Posts: 344
Joined: Thu May 25, 2017 3:08 pm

Re: Thoughts on changing withholding for 2018? Complicating factors!

Post by not4me » Fri Feb 23, 2018 1:57 pm

I'm surprised you haven't gotten more info by now. I'll give the thread a bump & expect you'll get better advice than I'm about to give.

I would think it is worth your time to review & possibly change. There have been other threads that reference specific calculators that will help provide an estimate; you may want to try & search on that. Depending upon how you are getting your 2017 taxes done, some software &/or preparers can provide some help estimating. The "standard" withholding rules don't know you specifics so many people may have situations that need review.

Congratulations on the expected Nugget! Depending upon your situation, that may affect your 2018 income (result of unpaid leave)? I'm not up to speed on 2018 tax law completely, but at least before 2018 there is a difference between child care expenses & the credit (& there are income restrictions). Whether you start in 2018 or not, if you open a 529 that may help your state tax. I didn't notice which state you are in, but there may always be something state specific.

Realizing you are trying to be close to accurate, I'm sure you also don't want to an underpayment penalty. That can be avoided by being sure you withhold in 2018 at least 100% of your 2017 tax (or 110% for higher income levels). With the new tax law, that would seem unlikely barring large raise or bonus.

Good luck!

annielouise
Posts: 240
Joined: Wed May 14, 2008 4:11 pm

Re: Thoughts on changing withholding for 2018? Complicating factors!

Post by annielouise » Fri Feb 23, 2018 2:20 pm

Child tax credit = $2000. Full amount available for AGI (married) of $400,000.

Your best bet is to try to calculate your 2018 taxes and see if current withholding is adequate.

cswenson
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Joined: Tue Feb 21, 2017 1:06 pm

Re: Thoughts on changing withholding for 2018? Complicating factors!

Post by cswenson » Fri Feb 23, 2018 2:27 pm

The state taxes and the charitable contribution deductions are not eliminated....they are only modified with a limit. You can still be able to deduct part of them, if not all. Of course at the end, you have to compare the itemized amount vs. $24K to see which is bigger.
Last edited by cswenson on Fri Feb 23, 2018 2:29 pm, edited 1 time in total.

TwstdSista
Posts: 806
Joined: Thu Nov 16, 2017 4:03 am

Re: Thoughts on changing withholding for 2018? Complicating factors!

Post by TwstdSista » Fri Feb 23, 2018 2:27 pm

Maybe do your 2018 taxes now? Use the 2017 forms and adjust for the 2018 changes.

I have a spreadsheet version of my 1040 that just requires me to fill in the blanks. I modified the taxes due based on the new tax brackets, changed the standard deduction and removed the personal exemption. You'd have to add in the correct child tax credit, and adjust your income based on parental leave.

It would get you a bit closer to the numbers you need. Just a thought....

Ace1
Posts: 196
Joined: Sun Dec 26, 2010 7:29 pm
Location: Twinsburg Ohio

Re: Thoughts on changing withholding for 2018? Complicating factors!

Post by Ace1 » Fri Feb 23, 2018 2:47 pm

BB,
The new irs publication 15 is available on the irs.gov site. It is for determining fed tax withholding.
They have not updated the new w4 calculator but it should be available by the end of Feb.

Your comment that charitable contributions are no longer deductible is not correct.
Taxes are limited to 10k as you indicated.
Which means you will still need to do the math to determine if itemizing works for you.

As to the new child tax credit, it phases out between 400k and 440k of magi (modified agi).

To consider withholding you should estimate your tax bill.
Gross pay his+Gross pay hers less all pretax 401k, HSA, section 125 medical
and pretax child care if available.
Then subtract either standard deduction 24k OR itemized deductions if larger
to get taxable income.
Compute the tax using the new rates ... 10-12-22-24-32-35-37... wherever you fit in since you
didn’t indicate any numbers.
Once you determine the tax, deduct any credits including child credit if you qualify, and then you can
determine how much tax should be withheld from both of your pays.
Hope this helps a little.
Ace

Olemiss540
Posts: 495
Joined: Fri Aug 18, 2017 8:46 pm

Re: Thoughts on changing withholding for 2018? Complicating factors!

Post by Olemiss540 » Fri Feb 23, 2018 6:42 pm

TwstdSista wrote:
Fri Feb 23, 2018 2:27 pm
Maybe do your 2018 taxes now? Use the 2017 forms and adjust for the 2018 changes.

I have a spreadsheet version of my 1040 that just requires me to fill in the blanks. I modified the taxes due based on the new tax brackets, changed the standard deduction and removed the personal exemption. You'd have to add in the correct child tax credit, and adjust your income based on parental leave.

It would get you a bit closer to the numbers you need. Just a thought....
This is what I do. I had a 2018 tax excel sheet the day the GOP has their first version on the floor.

Also, I HIGHLY recommend the MrMoneyMustache forum's finance spreadsheet (someone help me with the precise name!).

This told me what taxes each withholding would provide and seems to work awesome for my specific situation.

On the kid front, I am not sure I would do anything until the end of the year (once born and you are filing taxes). Just set your individual tax rates up and worst case is you get a refund! Good luck on the new addition!
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

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