tax exempt income

[Rigkld]

My income has risen dramatically this year although part of it is tax exempt. How do I fill out my W4 to ensure enough taxes are taken out from both my taxable income and my husbands income so we don't owe money at the end of the year? We are also on subsidized Covered California insurance and I believe that is calculation is based on both taxable and non-taxed income. I would rather overpay to cover any additional payment due for that health insurance. Ideas?

[Gabriella_EA]

Hi @Rigkld!

You've got some great questions!

First off, to get your federal withholding right so you don't owe at the end of the year, there are a number of great tools out there. Here are some of my favorites:

• TurboTax W-4 Calculator 2023
• IRS Withholding Estimator

When you have a good 15-20 minutes to sit down and work on this, grab your most recent paystubs from any/all jobs you (and your husband) have worked this year, and go through the questions in one of these tools. At the end of the process, you'll be able to see an estimate of what you're on track for this year, and then you can also use the tool to figure out how to adjust the W-4 to get you to the correct withholding.

You can update your withholding as much as you need to in any given year, so it's not a bad idea to check up on your withholding now, and again in a couple months!

If you're getting too much in monthly health insurance premium assistance based on your income level, you can work with your state marketplace to update your anticipated income for 2023 so that you don't have to pay back a substantial amount of the advance premium tax credit when you file next year.