Tax credits

Forum|Forum|4 years ago
June 8, 2022
1 reply
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I'm expecting some large tax credits this year from things like purchasing an EV and installing solar on my roof. How should I update my W-4 election to minimize tax withholdings from my paycheck?

Best answer by bluedeb

Updated

Adjusting your withholding could move your refund to your paychecks

If getting your refund throughout the year rather than at tax time sounds appealing, you can adjust your withholding today. To do so, you'll need to fill out a new Form W-4 and submit it to your employer.

This form requires you to fill in a few sections depending on your situation. The more accurately you complete the form, the more precise your withholding should be.

For those with multiple jobs or that have a spouse that works, you'll need to complete Step 2.
Otherwise, you can use Step 3, claiming dependents, and Step 4, other adjustments, to make changes to your withholding.
These options allow you to reduce the tax withheld through claiming tax credits or deductions.
They also let you add other sources of income or extra withholding if you find you want more money withheld from your paycheck.

Tools, such as withholding tax calculators, can help you figure out what to fill in on the various steps of Form W-4. You'll have to answer questions about your tax situation before the calculator will tell you how to fill out your Form W-4.

bluedeb

Answer

Alumni - Champ

Updated

Adjusting your withholding could move your refund to your paychecks

This form requires you to fill in a few sections depending on your situation. The more accurately you complete the form, the more precise your withholding should be.

For those with multiple jobs or that have a spouse that works, you'll need to complete Step 2.
Otherwise, you can use Step 3, claiming dependents, and Step 4, other adjustments, to make changes to your withholding.
These options allow you to reduce the tax withheld through claiming tax credits or deductions.
They also let you add other sources of income or extra withholding if you find you want more money withheld from your paycheck.

Critter-3

Level 15

There are no more "allowances" on a W-4 any longer and it is unadvisable to change the withholding because you will forget to change it back next year and you will be in a world of hurt.

If you insist on doing something ... then even if you are single change to Married filing jointly and/or add a bunch of kids under the age of 17 in step 3 ... either of these will artificially lower the taxes being withheld. https://www.irs.gov/pub/irs-pdf/fw4.pdf

JRanumAuthor

Level 2

Thanks for clarifying Critter-3, that's what I thought about allowances. Unfortunately I do need to change my withholding amount since the EV federal tax credit is nonrefundable. In other words, I need to owe $7,500 in tax at year end to take full advantage. Please let me know if you have any other advice for updating withholdings - I've found it more difficult since allowances have gone away, but I'll look at the link you sent previously.