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hello guys, I am a single E6 Active duty military, I own one home and currently being rented out in Maryland. My co-workers just inform me about W4, albeit not in detail. I would like to know what I can exempt from the exemption block and is it wise to do one or the other or is it just a preference thing.
When filing for exemptions, the expectation is that you will use the formula so that your taxes are taken at the rate you are supposed to pay.Quote:
Originally Posted by law87
I.E. If you claim 10 dependents, the taxes withheld will be what the formula says needs to be taken out. The more exemptions, the less tax.
Link to their calculator:
https://apps.irs.gov/app/withholdingcalculator/
The more exemptions, the less tax paid as you go. which means the more tax you end up paying on the back end at tax time-conceivably. I find, given similar situation, that claiming the normal 1, plus one additional, keeps me on the safe side of not getting blindsided at tax time.
Go to https://www.irs.gov/pub/irs-pdf/fw4.pdf to download the W-4 form. It is self-explanatory. No need to complete page 2 unless you have can itemize deductions.
I have rental income. Good Lord, I think I would use the W4 to have more money taken out, not the other way around. I claim head of household (2 kids) and I barely get by not having to pay taxes. Rental income is a killer come tax time.
If you are getting BAH and BAS it helps a little since it's not considered taxable income.
It depends on how long you have had the rental, how much rent and related expenses. In the beginning with depreciation, interest, insurance, management fees and taxes, I don't think it made much difference on taxes. I have been withholding more for taxes now from my retirement check this year, but until I do my taxes I don't have a clue. You need to make sure that you don't end up with a tax bill that is greater than 10% of what you owed the prior year to avoid any penalty. You need to figure out the impact on your income, gain or loss and your marginal tax bracket to make an educated decision on withholdings. If you are unsure, you should do it gradually.Quote:
Originally Posted by jpcavin
Oh...my favorite topic. Taxes.
I have struggled with the exemptions number over the years because of changes in my deductions (as others have noted).
What has worked best for me is to look at how much I got back the previous year, and if it is more than $1,000 I increase my exemptions by 1. Opposite is also true....if I owe more than $1,000 (or multiples of $1,000) then reduce exemptions by that multiple.
That is the rule of thumb for me. (yours may vary slightly) That W-4 form is pretty impossible to decipher.
As an example, my daughter just got her first full time, after college job. So the employer says just fill out this W-4. My daughter looked at it and immediately called me saying 'what does all this mean?', referring to the forms various line items.
I told her, just put 1....for yourself.. and sign the form. She was skeptical and said what about all these other things? I told her that they would all be 0 for her. She still wasn't convinced. So I said, OK, start reading the list to me. Most of them I cut her off before she even finished the item because I knew she didn't meet the criteria. (Just starting out, single, only income from salary, no exemptions for any of the additional things.) Even her 401K would not affect taxes because she was 100% Roth.
Anyway, hope that can give you an alternate method for your exemptions, that is not too cumbersome. By the way, you gotta do the same thing for State taxes if you are fortunate to be like me and live in a State that has State Income Tax. (It will likely be different!) :Eyecrazy:
If you're a military on active duty, ask your office for assistance with that. I don't remember quite sure but militaries got special exemptions apart from this field. Find some more info here: https://taxes.arlingtonva.us/military-tax-exemption/ as well as form instructions by PDFfiller or the IRS
"Taxes? We don't pay taxes. Only the little people pay taxes. "
-reportedly said by Leona Helmsley.
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