W4 changes after getting married and having a baby

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Topic Author
FriedBaloney
Posts: 5
Joined: Tue Jun 04, 2019 11:44 am

W4 changes after getting married and having a baby

Post by FriedBaloney » Tue Jun 04, 2019 11:55 am

Hi-
I got married in December 2018 and we filed jointly for 2018. We had a baby in January 2019. I'm confused about if I should change my W4 withholding. I'm confused because I always heard that once you have a baby you get a favorable tax credit, hence everyone around me willing Baby to arrive on Dec 31. However, now that I use the W4 calculator it seems I need to have more withheld from my paychecks. This feels like a cruel joke with the expense of daycare coming up.

Our incomes are approximately $90k (me)/ $30k (spouse). Daycare will be $1200/mo starting August. My employer does not offer an HSA. The W4 calculator tells me to have more withheld from my paycheck than when I was unmarried/childless with $90K income. Does this seem right?

Thank you

Edit: Incomes are $93k/ $38k. I used the IRS calculator but seem to have entered something incorrectly.
Last edited by FriedBaloney on Thu Jun 06, 2019 12:57 pm, edited 1 time in total.

Silk McCue
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Re: W4 changes after getting married and having a baby

Post by Silk McCue » Tue Jun 04, 2019 12:27 pm

No it doesn’t make sense. When you filed single last year for 2017 half of your income was taxed at 25% under the old tax law. Only a modest % of your income this year will be in the 22% bracket with MFJ.

Compare what your combined federal taxes paid amount was for your recent 2018 filing year against the run rate for the proposed W4 withholding. If they are grossly out of whack for similar income then you likely have operator error on the calculator or a bad calculator.

Cheers

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CAsage
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Re: W4 changes after getting married and having a baby

Post by CAsage » Tue Jun 04, 2019 12:32 pm

I don't trust W4 calculators. If you did your own taxes last year, then do a predictive 2019 return with your best estimate of your total (both) income, plus the new tax status of MFJ, and see how much you will owe. How does that compare to your current tax deduction times the number of future pay periods? You want to get close to break even here, it's no good to get a big refund... With the larger income, your taxes should go down.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.

megabad
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Re: W4 changes after getting married and having a baby

Post by megabad » Tue Jun 04, 2019 1:00 pm

FriedBaloney wrote:
Tue Jun 04, 2019 11:55 am
Hi-
I got married in December 2018 and we filed jointly for 2018. We had a baby in January 2019. I'm confused about if I should change my W4 withholding. I'm confused because I always heard that once you have a baby you get a favorable tax credit, hence everyone around me willing Baby to arrive on Dec 31. However, now that I use the W4 calculator it seems I need to have more withheld from my paychecks. This feels like a cruel joke with the expense of daycare coming up.

Our incomes are approximately $90k (me)/ $30k (spouse). Daycare will be $1200/mo starting August. My employer does not offer an HSA. The W4 calculator tells me to have more withheld from my paycheck than when I was unmarried/childless with $90K income. Does this seem right?

Thank you
I just ran your numbers (very roughly) and I get much much less tax due (more than $2k less). I would double check your calculations. I assume you are using the IRS calculator.

Does employer offer an DC FSA? This might be useful for you.

bayview
Posts: 1867
Joined: Thu Aug 02, 2012 7:05 pm
Location: WNC

Re: W4 changes after getting married and having a baby

Post by bayview » Tue Jun 04, 2019 9:11 pm

FriedBaloney wrote:
Tue Jun 04, 2019 11:55 am
Hi-
I got married in December 2018 and we filed jointly for 2018. We had a baby in January 2019. I'm confused about if I should change my W4 withholding. I'm confused because I always heard that once you have a baby you get a favorable tax credit, hence everyone around me willing Baby to arrive on Dec 31. However, now that I use the W4 calculator it seems I need to have more withheld from my paychecks. This feels like a cruel joke with the expense of daycare coming up.

Our incomes are approximately $90k (me)/ $30k (spouse). Daycare will be $1200/mo starting August. My employer does not offer an HSA. The W4 calculator tells me to have more withheld from my paycheck than when I was unmarried/childless with $90K income. Does this seem right?

Thank you
With $1,200/mo infant daycare, does it make financial sense for your spouse to work for $30k/year?

And congrats on the new family!
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

Topic Author
FriedBaloney
Posts: 5
Joined: Tue Jun 04, 2019 11:44 am

Re: W4 changes after getting married and having a baby

Post by FriedBaloney » Thu Jun 06, 2019 12:51 pm

bayview wrote:
Tue Jun 04, 2019 9:11 pm


With $1,200/mo infant daycare, does it make financial sense for your spouse to work for $30k/year?

And congrats on the new family!
Thank you! That's something we've discussed, too. I looked at our numbers again last night and our salaries are closer to $93k/ $38k, which helps, but there is still the question of whether or not daycare is worth it.

Topic Author
FriedBaloney
Posts: 5
Joined: Tue Jun 04, 2019 11:44 am

Re: W4 changes after getting married and having a baby

Post by FriedBaloney » Thu Jun 06, 2019 12:54 pm

megabad wrote:
Tue Jun 04, 2019 1:00 pm

I just ran your numbers (very roughly) and I get much much less tax due (more than $2k less). I would double check your calculations. I assume you are using the IRS calculator.

Does employer offer an DC FSA? This might be useful for you.
I did use the IRS calculator but have clearly entered some incorrect information. Thanks for running those numbers to offer a ballpark. That really is helpful.

I asked my employer about a DC FSA at your suggestion. They do offer one! I sure wish someone had told me that when the baby arrived. I think I can still enroll because we will have a change in daycare cost when she goes in September. Thanks for the suggestion; HR did not mention this to me and I didn't know to ask.

Topic Author
FriedBaloney
Posts: 5
Joined: Tue Jun 04, 2019 11:44 am

Re: W4 changes after getting married and having a baby

Post by FriedBaloney » Thu Jun 06, 2019 12:59 pm

CAsage wrote:
Tue Jun 04, 2019 12:32 pm
I don't trust W4 calculators. If you did your own taxes last year, then do a predictive 2019 return with your best estimate of your total (both) income, plus the new tax status of MFJ, and see how much you will owe. How does that compare to your current tax deduction times the number of future pay periods? You want to get close to break even here, it's no good to get a big refund... With the larger income, your taxes should go down.
Thanks. I have a CPA do my taxes. I should probably just ask him about this whole W4 thing, but I thought it would be easy to do on my own instead of paying him $150 for an answer. $150 is looking very worth it now that I'm calculating things incorrectly.

Raryn
Posts: 63
Joined: Sun Dec 01, 2013 9:39 am

Re: W4 changes after getting married and having a baby

Post by Raryn » Thu Jun 06, 2019 2:13 pm

bayview wrote:
Tue Jun 04, 2019 9:11 pm
FriedBaloney wrote:
Tue Jun 04, 2019 11:55 am
Hi-
I got married in December 2018 and we filed jointly for 2018. We had a baby in January 2019. I'm confused about if I should change my W4 withholding. I'm confused because I always heard that once you have a baby you get a favorable tax credit, hence everyone around me willing Baby to arrive on Dec 31. However, now that I use the W4 calculator it seems I need to have more withheld from my paychecks. This feels like a cruel joke with the expense of daycare coming up.

Our incomes are approximately $90k (me)/ $30k (spouse). Daycare will be $1200/mo starting August. My employer does not offer an HSA. The W4 calculator tells me to have more withheld from my paycheck than when I was unmarried/childless with $90K income. Does this seem right?

Thank you
With $1,200/mo infant daycare, does it make financial sense for your spouse to work for $30k/year?

And congrats on the new family!
Gotta take into consideration not just the income but also the career opportunities that would be lost by taking years out of the workplace. Many people who are a stay at home parent for a few years have permanently decreased earnings when they return to the workplace.

Ybsybs
Posts: 533
Joined: Thu Aug 28, 2014 4:28 pm

Re: W4 changes after getting married and having a baby

Post by Ybsybs » Thu Jun 06, 2019 2:20 pm

Raryn wrote:
Thu Jun 06, 2019 2:13 pm
bayview wrote:
Tue Jun 04, 2019 9:11 pm
FriedBaloney wrote:
Tue Jun 04, 2019 11:55 am
Hi-
I got married in December 2018 and we filed jointly for 2018. We had a baby in January 2019. I'm confused about if I should change my W4 withholding. I'm confused because I always heard that once you have a baby you get a favorable tax credit, hence everyone around me willing Baby to arrive on Dec 31. However, now that I use the W4 calculator it seems I need to have more withheld from my paychecks. This feels like a cruel joke with the expense of daycare coming up.

Our incomes are approximately $90k (me)/ $30k (spouse). Daycare will be $1200/mo starting August. My employer does not offer an HSA. The W4 calculator tells me to have more withheld from my paycheck than when I was unmarried/childless with $90K income. Does this seem right?

Thank you
With $1,200/mo infant daycare, does it make financial sense for your spouse to work for $30k/year?

And congrats on the new family!
Gotta take into consideration not just the income but also the career opportunities that would be lost by taking years out of the workplace. Many people who are a stay at home parent for a few years have permanently decreased earnings when they return to the workplace.
In addition to Raryn's points, childcare typically gets much less expensive as the child ages so the cost compared to the parents' two paychecks continues to go down.

bayview
Posts: 1867
Joined: Thu Aug 02, 2012 7:05 pm
Location: WNC

Re: W4 changes after getting married and having a baby

Post by bayview » Thu Jun 06, 2019 3:12 pm

Ybsybs wrote:
Thu Jun 06, 2019 2:20 pm
Raryn wrote:
Thu Jun 06, 2019 2:13 pm
bayview wrote:
Tue Jun 04, 2019 9:11 pm
FriedBaloney wrote:
Tue Jun 04, 2019 11:55 am
Hi-
I got married in December 2018 and we filed jointly for 2018. We had a baby in January 2019. I'm confused about if I should change my W4 withholding. I'm confused because I always heard that once you have a baby you get a favorable tax credit, hence everyone around me willing Baby to arrive on Dec 31. However, now that I use the W4 calculator it seems I need to have more withheld from my paychecks. This feels like a cruel joke with the expense of daycare coming up.

Our incomes are approximately $90k (me)/ $30k (spouse). Daycare will be $1200/mo starting August. My employer does not offer an HSA. The W4 calculator tells me to have more withheld from my paycheck than when I was unmarried/childless with $90K income. Does this seem right?

Thank you
With $1,200/mo infant daycare, does it make financial sense for your spouse to work for $30k/year?

And congrats on the new family!
Gotta take into consideration not just the income but also the career opportunities that would be lost by taking years out of the workplace. Many people who are a stay at home parent for a few years have permanently decreased earnings when they return to the workplace.
In addition to Raryn's points, childcare typically gets much less expensive as the child ages so the cost compared to the parents' two paychecks continues to go down.
Right, I should have been more clear when I wrote “infant daycare.” I was thinking about just taking off for the first two years, when costs are insane. Of course, if OP and wife plan to have more kids, that just stretches on and on.

Another consideration is whether the current salary is projected to increase rapidly in a few years.

And yet another factor is that one should expect a lot of days and hours missed from work for illnesses, doctor visits and so forth. What happens if/when sick days and vacation days are used up?
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

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