Author Topic: How can we optimize our withholdings?  (Read 1884 times)

netskyblue

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How can we optimize our withholdings?
« on: February 02, 2015, 12:34:06 PM »
Husband and I got married in April last year.  Things were WEIRD income-wise, so I can't trust 2014's tax owed to be the same as what 2015 will be.

*MY* job is the same, income roughly the same (can vary a small bit due to overtime, etc).

We got married in April, and I changed my W4 to "married", and claimed all zeros on federal and state.

My husband forgot to change his W4 to "married," got let go in August, got ~$1300 in unemployment, got a new job in November that pays less per hour.  He also paid out-of-pocket for health insurance through the Marketplace in 2014, whereas this year his new employer pays most of his premium.  He also becomes eligible for a 401k for the first time in his life this month (or next month?) and plans to contribute some - I'm not sure if he's decided what %, thus lowering his taxable income even further.

He also pays student loan interest.  It was ~$700 this year.

His income is fairly variable, meaning he might get as many as 10 hours of overtime a week, or not.

This year, we ended up getting a refund of almost $2k from federal, and almost $200 from state. 

Is there a way we can figure out reasonably well how to best optimize our withholdings, or are we best off letting it ride out one full year, so we have a better grasp on what his actual taxable income will be at this new job?

MDM

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Re: How can we optimize our withholdings?
« Reply #1 on: February 02, 2015, 06:48:59 PM »
Is there a way we can figure out reasonably well how to best optimize our withholdings, or are we best off letting it ride out one full year, so we have a better grasp on what his actual taxable income will be at this new job?
You do need a decent idea of your combined income to have a decent idea of your best withholding strategy.

A couple of web sites commonly suggested:
http://www.irs.gov/Individuals/IRS-Withholding-Calculator
http://www.paycheckcity.com/calculator/w4assistant.html?execution=e2s1

If you try both and get the same answer, that gives you a reasonable basis to conclude you have a correct answer.

Our personal experience has been that creating our own spreadsheet, tailored to our specific situation, worked best of all.  You may or may not want to go through that effort.  See http://forum.mrmoneymustache.com/ask-a-mustachian/turbo-tax-vs-cpa/msg539186/#msg539186 for more.