Perhaps most importantly I’d encourage everyone to take out a pen and paper and try to calculate their 2018 tax liability by hand. I’ll take your money, pocket the interest, then return it to you in 16 months. If you irrationally like giving out zero interest loans, I’m happy to provide that service to you.
People who are bad at math rejoice at a large refund after having over-withheld and given the government an interest free loan for 4-16 months.
If you’re overshooting, then claim more exemptions. It will take you 10 minutes on Taxcaster and your paystub to see if you’re on track. It’s foolish to over-withhold income taxes, so don’t do it. Here’s the rough snapshot of what will happen to my taxes:Īfter playing around in Taxcaster and my spreadsheet, I’d encourage you to look through your payroll withholdings and see if you are on track to hit your federal tax liability in 2018. The upside to doing so has grown by about $4k this year, depending on family size of course. Such families can now get humungo amounts of free money on $0 withholdings. Remember that you want to choose Trad when MTR_today (federal + state) > MTR_future (federal + state) and Roth otherwise.įor moderate income families with many children, EITC hacking is alive and well. After doing so, figure out whether you want to contribute to Roth or Traditional IRAs/401ks going forward. Calculate your effective marginal tax rate (I talk explicitly about how to calculate that in my EITC post). I’d encourage every person to spend a few minutes to forecast their new tax liability for 2018. If you have issues with my sheet, report them to me and I’ll update it accordingly. It matches dollar for dollar with my estimated 2018 spreadsheet. Today I noticed that Turbotax has updated their free Taxcaster software to account for the new tax law changes: The (imperfect and incomplete) draft can be downloaded here.*** The book discusses wealth accumulation strategies, of which tax minimization is a key component. *** If you care to learn deeply about the tax code, I have begun writing a book which contains everything I know on the topic.
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