So we are married and file jointly. Last year we made say $160,000. Maxes out the 401k, student loans, mortgage interest, 2 children, and still ended up owing. It says we make too much money to claim the full credit for every deduction. How can we get more deductions or lower our rate? Make too much to get anything for a Roth IRA, maxed out our HSA. Any ideas?
it is now 2020 which eliminates anything you can do for 2019 since you maxed out all the deductions. even if you could contribute to a ROTH it is not deductible. These days a $1 deduction only saves the taxpayer at most around $ .40. Thus you are out of pocket at least $.60 for every dollar n deductions.
If your withholding at work doesn't cover the total tax on your income like if you have interest, dividends and investments you should send in extra estimated payments. That's what I have to do. If you owe too much, Turbo Tax might even print out the 1040ES slips as a suggestion.
To prepare estimates for next year you start with your current return, but be careful not to change anything. If you can't get back into your return, Click on Add a State to let you back into your retun.
You can just type W4 in the search box at the top of your return , click on Find. Then Click on Jump To and it will take you to the estimated tax payments section. Say no to changing your W-4 and the next screen will start the estimated taxes section.
Or Go to….
Federal Taxes or Personal (Deskop H&B)
Other Tax Situations
Other Tax Forms
Form W-4 and Estimated Taxes - Click the Start or Update button
Each make the maximum contribution to your respective 401K's.
If either of you work from home, see if you qualify for the Home Office Deduction.
There's really two separate issues here:
"We owe too much money when we file our return"
That just means you did not pay enough into the system during the year. You need to adjust your W-4s to claim fewer allowances or have more tax withheld, or you need to make estimated payments, or both.
"We want to lower our tax bill and we have extra money that we don't need to spend on living expenses, but have run out of places to invest the extra that would lower our taxes."
Golly it's tough to be you, isn't it? Remember your 401(k) contribution limit for 2020 is $19,500 or $26,000 if you age 50 or over. If one spouse is not offered a retirement plan at work, a regular or Roth IRA may be an option. The HSA maximum is $7100 for 2020 plus $1000 catchup for each spouse aged 55 or over.
You may want to start looking at investments that will pay you tax-free income, such as state and municipal bonds. You still pay tax on the income from your employer, but you invest it in such a way that the future income stream is tax-free.
You could start making large charitable contributions that would contribute to your emotional and spiritual wellbeing if not your financial wellbeing, and get the itemized tax deduction. When you get ready for bed you can think to yourself, "my mutual fund is up/down another 0.3% today" or "I helped cure cancer/alzheimers/whatever is important to you today."
Basically, if you have so much extra money lying around after paying your living expenses that you've maxed out the easy tax shelters and still have money to invest, it's time to find a real good money manager.