I have 44% more income this year than last year (thanks to a new job) but my federal refund is dropping by 33% and I owe on the state side. What could be the reason?

[lookingforanansw]

My apologies - I asked this question earlier but didn't mention a new job was the reason for the income increase. I'm still claiming 1 for a family of four. Besides the new job, the only difference this year is I sold stock for an $18,000 gain, and for that I would pay a 15% capital gain tax of $2700 on the federal and $918 (5.1%) on the state side. When you combine my increased income with the stock gain, it's $62,000 more in taxable income than last year. Because of the bump in income, I'm no longer eligible for Child Tax Credit of $2,000 that I received last year. Any idea why the big drop in refund? I would think if anything, my refund would be larger than last year given I'm paying much more in taxes. Any ideas? Thanks. 

[AmandaR1 · Accepted solution]

It sounds like you pretty much figured it out by loosing a credit, earning more and the stock gain (which almost never has taxes withheld). The best thing for you to do to understand your situation (we can't see your return), is to compare your last year's return, line-by-line to your current form 1040. 

It's only two pages, but this will allow you to see what's happening. Page 1 covers all income, certain deductions and page 3 covers taxable income, deductions, total tax, credits and withholding. 

Keep in mind, when your employer withholds taxes from your pay checks, they are simply withholding based on an estimate of what you will owe at the end of the year. Your job couldn't know that you were getting a big stock payout and that could be the reason you didn't qualify for the child tax credits (not your pay increase). 

The point is that your paycheck withholding is just an estimate for what your taxes will be at the end of the year, on your return. Your refund or payment due, is just the difference between the estimates that were withheld and your actual taxes on your return.  

Before filing, you can preview your main form 1040, by following the steps below: https://ttlc.intuit.com/replies/3740344