Author Topic: Make money by having too much state income tax withheld  (Read 3572 times)

Cathy

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Make money by having too much state income tax withheld
« on: December 20, 2014, 05:27:20 PM »
[This post discussed the possibility of reducing one's federal tax liability through clever use of state tax prepayment. I decided to delete the post because the information was not as carefully written as my more recent posts and I wouldn't want it to mislead somebody.]
« Last Edit: November 24, 2015, 01:35:26 AM by Cathy »

MooseOutFront

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Re: Make money by having too much state income tax withheld
« Reply #1 on: December 20, 2014, 05:36:22 PM »
I like it.  You could lock in a guaranteed rate of return by applying the money to mortgage principal.  Assuming of course you'll have cash to write a check with in 15-16 months when you pay it back.

ClaycordJCA

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Re: Make money by having too much state income tax withheld
« Reply #2 on: December 20, 2014, 05:56:55 PM »
Doesn't one risk being subject to quarterly tax payments in subsequent years because of being under withheld? 

RWD

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Re: Make money by having too much state income tax withheld
« Reply #3 on: December 20, 2014, 06:20:43 PM »
So let's imagine you have $10,000 extra withheld in the final paycheck of 2014 for state income tax.

Your paychecks must be a lot bigger than mine if you've got a spare $10k that you could withhold...

Undecided

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Re: Make money by having too much state income tax withheld
« Reply #4 on: December 20, 2014, 06:49:29 PM »
Regularly, I don't think it's worth it for me, but I've planned to do it for my last year of working, taking the deduction at 35% and then paying 0% on the refund.

mqtxc

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Re: Make money by having too much state income tax withheld
« Reply #5 on: December 20, 2014, 07:17:52 PM »
If you use your income taxes paid to a state as an itemized deduction on your federal return, your state refund for that year will be taxable income on your federal return the following year. It's reported as income on line 10 of the 1040. 

TerriM

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Re: Make money by having too much state income tax withheld
« Reply #6 on: December 20, 2014, 07:24:10 PM »
Just don't do this when CA is issuing IOUs.

Bob W

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