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?
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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.
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.
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.
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.
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
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.
@JRanum You can use the TurboTax W-4 calculator to use the tax withholding calculator to see how to adjust your W-4 for a bigger tax refund or more take-home pay.
https://turbotax.intuit.com/tax-tools/calculators/w4/
You can change your W-4 anytime, I don't know why Critter suggested that you do not change your W4 but allot of people change their W-4 to receive more or less in their paychecks.
Ok ... your withholdings at your job has ABSOLUTELY NOTHING to do with your tax liability that the EV credit can handle ... what you need to do is have enough taxable income on the return to produce enough tax liability to fully use the credit. You can sell stock at a profit, sell off some properties, cash in a 401K and/or convert some IRA money to ROTHs or take a second job.
LOOK at the form 1040 ... note that withholding on line 25a doesn't affect what the credit can negate on line 16...
Understood, that makes sense now. Thanks for all of the help y'all!
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