Tax Withholdings and Your W-4

Did you get a large refund this past April? More than $1,000? Or perhaps you owed money and had to write a check you didn’t want to write? It may be time to sit down, sip your beverage, and learn a bit about how to adjust your tax withholdings.

Withholdings are the taxes your employer takes from your pay each check, and it all starts with your payroll department. It’s not too tough once you understand, and it’s better that you control your money.

The first step to adjusting your withholdings is to go to the TurboTax W-4 withholding calculator to help you estimate your personal withholding allowances. All you need to do is enter info about you, your dependents, paycheck and any other income info. The TurboTax W-4 withholding calculator will also take into account home ownership, charitable donations, and retirement contributions since those all can help your tax situation and can increase the amount of allowances you can take.

The TurboTax W-4 withholding calculator has also been updated to reflect the taxes you will file in 2024. Once you answer simple questions, you can estimate the number of withholding allowances to claim on your W-4, whether you want more money in your paycheck or a bigger tax refund. When you are done, you can print a blank W-4 to fill out and give to your employer or payroll provider.

Here are a number of situations that would prompt you to want to review and possibly adjust your withholding:

When you experience life changes, it’s time to look at how your taxes are impacted. Marriage or divorce can change your tax situation and cause you to adjust your W-4. Although the addition of a dependent, by birth, adoption, or an elderly parent moving in and getting more than 50% of their support from you, will no longer qualify as an extra exemption under the new tax law, you may still receive other tax benefits that will give you a personal allowance when you have dependents.

The purchase of a new home will likely have the largest impact on your withholding. A $250,000 mortgage (at 4.5% 30yr fixed) will have just over $11,000 in tax-deductible interest the first full year. Add another $4,000 for property tax and this $15,000 could translate to additional allowances for itemized deductions on your W-4.

Having a side gig and a W-2 job may be a reason to lower your withholding allowance for your W-2 job so you can pay in more taxes to offset the taxes that are not withheld from your self-employment income.

Don’t worry about knowing these tax rules. Meet with a TurboTax Full Service Expert who can prepare, sign and file your taxes, so you can be 100% confident your taxes are done right. Start TurboTax Live Full Service today, in English or Spanish, and get your taxes done and off your mind.