Income increase 1099

[Mmhenning]

We will be making 75k next year with the possibility that it may be 1099 income. We have 4 small children we claim. How would I figure out our tax payments needed for the year to cover federal/state of mo/ so I a security/ Medicaid. I assumed 25% but that seems high considering all the credits we would receive with the kids. 

[OpeA1]

Hello Mmhenning!

Turbo Tax has a great tool (TaxCaster) for helping you navigate what your taxes may be next year. Please see the link below to help you with your tax estimations: https://turbotax.intuit.com/tax-tools/ 

Be sure to put in all your dependents and the fact that you are 1099 income and TaxCaster will do the rest for you!

Thank you for using Turbo Tax!

[SundayInSalem]

TaxCaster will not accurately estimate your 2021- or 2022-income tax liability because it is set for 2020.

The American Rescue Plan became law in 2021. Among other things, it increased the child tax credit from $2,000 for each child under 17 in 2020 to $3,000 per child (or $3,600 for each child under age six) in 2021. TaxCaster uses $2,000 per child.

Additionally, the IRS may have sent you an advanced child tax credit payment which would have to be subtracted from your child credit amount.

The eFile tax calculator says it is updated for current tax law and it appears to be correct.

See: Tax Calculator for 2021 Taxes Due in 2022. Estimate Now.

Other adjustments

Your gross income may be less than $75,000 after adjustments.

Net earnings. Self-employed individuals pay tax on net earnings so you would be taxed on $75,000 less any business deductions. You would have to include deductions to estimate your net earnings from self-employment, such as a home office, equipment, supplies, business mileage and communications expenses (business percentage of phone and internet).

Health insurance. You can deduct health insurance premiums. See: Self-Employed Health Insurance Deduction

Retirement savings. You can deduct contributions to a retirement plan, such as a Simplified Employee Pension (SEP). See: Retirement Plans for Self-Employed People

An illustration

That said, a married couple, filing jointly with total income of $75,000 comprised entirely of self-employment income and four children under age six, would owe $81, due in large part of receiving $14,400 in child tax credit.

If you received advanced payments, the amount would be subtracted from the refund. In this example, if the couple received $14,400 (4 x $3,600) in advanced child credit they would owe $14,481 ($14,400 + $81).

Therefore, the actual tax rate on $75,000 is 19% ($14,481/ $75,000), exclusive of the child tax credit.

Try the calculator yourself.