Estimating 2016 Taxes

[creditcardfree]

College starts next week for our daughter. Thus a tuition and housing bill will be due in September. This made me think of the American Opportunity Credit, and wondering how much we might be eligible for this year.

After a lot of number crunching and estimating, I came up with credits worth between $2075 and $2500. The maximum is $2,500 based on a maximum of $4000 paid in qualified tuition expenses. Room and board are NOT qualified tuition expenses. It is actually our biggest expense.

This means we will get a refund in the spring. I'm estimating approximately $1178, up to $1553 depending on the American Opportunity credit.

I'm going to firm it all up once we have paid tuition in full. I've thought of changing withholding for the last two or two and a half months of the year. I figure it might be nicer to have the money earlier than wait for a refund. That will require some more number crunching later.

Do you estimate your taxes late in the year and make necessary adjustments?

[Jluke]

Do you estimate your taxes late in the year and make necessary adjustments?

So far I've estimated whether I'll be stuck with the standard deduction instead of itemizing and it looks like I'm going to be really close to, or under, the standard deduction this year ($12,600 for 2016). So I might not be able to itemize.

When I cashed in stock options, I chose a higher tax bracket so more federal tax was taken out in the hopes that I won't owe as much and/or might receive a refund.

I also am maxing the 401k for tax purposes.

[creditcardfree]

So far I've estimated whether I'll be stuck with the standard deduction instead of itemizing and it looks like I'm going to be really close to, or under, the standard deduction this year ($12,800 for 2016 I believe). So I might not be able to itemize.

Standard deduction remains the same, at $12,600 for couples filing jointly in 2016, according to the IRS website. We won't be able to itemize either, but that is fine with me.

[scfr]

My husband is self-employed so we pay quarterly estimated taxes. I base our estimated tax payments on the prior year's taxes, to avoid an underpayment penalty. Because income fluctuates, sometimes we wind up owing and sometimes we get a refund. I've learned to accept occasional tax refunds in exchange for a guarantee of no penalty.

This is a good reminder for me. My earned (W-2) income is probably going to be down for the remainder of the year, which means less withholding. I'll need to crunch numbers and maybe add a bit to the September 15th estimated tax payment. Thanks, creditcardfree!

When we were both salaried employees with predictable income, I adjusted my withholding to get us as close to zero (no refund and no payment) as I could on the tax return.

[GoodSteward]

One trick I learned from a CPA was if your itemized deductions are even close to the standard, it is still better to itemize. Why? Because states do not have all the credits and standard deduction is much lower, but the itemized deductions usually carry over for the full amount. Doing this lowered my federal refund a little , but I went from owing GA to getting a refund. Great advice I think. I have 3 kids and one on the way that helps too. lol

I try to just overpay some on my IT job to compensate for my ministry income that is more like self-employment. I don't pay in during the year on that, and I have a ton of writes offs thankfully. I've been good so far.

[creditcardfree]

One trick I learned from a CPA was if your itemized deductions are even close to the standard, it is still better to itemize. Why? Because states do not have all the credits and standard deduction is much lower, but the itemized deductions usually carry over for the full amount. Doing this lowered my federal refund a little , but I went from owing GA to getting a refund. Great advice I think.

I agree that is great advice. We don't pay state taxes, so it doesn't make a difference, but for many it sure could!