W-4 Guidance for Dual-Income Household — Avoiding Another $17K Tax Bill

[gdama001]

Last year, my spouse and I ended up with a surprise tax bill of about $17,000, despite being W-2 employees with what we thought were sufficient withholdings. We’re trying to avoid that kind of shock again and would really appreciate help understanding how to correctly fill out our W-4s — and, just as importantly, what might have caused such a large underpayment in the first place.

Here’s our situation:

• I earn around $210K annually, including a bonus that makes up about 20% of my income.

• My spouse earns about $110K.

• We have one dependent.

• We also have a rental property that generated roughly $15K in net profit last year.

• We file jointly and claim zero deductions on our W-4s (we just take the standard deduction when we file).

• The only major change in the tax year was that we bought a house.

• We’ve owed taxes in past years — sometimes a few thousand — but never anything close to this.

We’re hoping to understand:

• What might have triggered such a large tax bill last year?

• Should we both be checking the “multiple jobs or spouse works” box on our W-4s?

• Should we use the extra withholding line on the W-4, or would estimated payments be better, particularly for the rental income?

• Are there common oversights or strategies for households like ours to ensure proper withholding?

Thanks in advance — any help is much appreciated. We’re trying to be proactive this time around.

[marctu]

There is a lot in your post, so I am going to focus on the areas that stick out to me, plus the caveat that this should all be run through a W-4 Calculator

Based upon your combined income of approximately $330,000 in both 2024 and 2025, with net rental income of approximately $15,000 the taxes on that amount, which is all in the 24% tax bracket is about $3,600.   So of that owe only about 21% is related to the rental income.  This is part of the issue.  You can choose to make estimated tax payments or add this into other income on Step 4 Line (a).  

So the remaining 79% under withholding is related to the two jobs.  At a minimum you should be checking the box on Line 4(c) in Step 2, which is the Multiple Jobs or Spouse Works, though you should actually be using the worksheet as it is more accurate.   Without knowing the year over year owe it is hard to tell what the reason for the increased owe is.   I would compare the 2023 and 2024 tax withholding for each one of you and see where the changes are. 

Ultimately, you need to also see what the withholding is year to date for 2025 as well.   Then compare that to the income this year.   You may also want to build in extra tax withholding in Step 4 (c) for both of you as well.  

All the best,

Marc T.

TurboTax Live Tax Expert

28 Years of Experience Helping Clients