I have calculated the new withholding amounts we expect to see on my husband's paychecks going forward after the new tax law was passed. I used
paycheckcity.com to do the calculations. We currently withhold 9 exemptions every pay period. That means the withholding in the past for us has been $409 per month. The new amount based on the same withholding will be $319 per month. An $80 difference, or $960 a year.Sounds great right? Well, if I'm understanding the new tax laws for no personal exemptions, but higher standard deduction for married couples, and lower tax brackets, we will definitely have lower taxes, but the withholding we are currently at will be deficient by $400, and maybe more if we cannot take the full American Opportunity Credit for college expenses in 2018. I don't mind owing, but I'm now working to decided if I want to change our withholding to 8, or even add more to retirement to offset income.
I will get it figured out. I know how to do it all, I just need more time to decide what we want to do. Sending more to retirement when we already invest 18% and expect a pension equal to half my husband's pay is starting to seem like overkill. Again, just decisions to be made. I also need to figure how much we may actually pay in college costs out of pocket this year.
Oh, and a note slightly related to figuring taxes. When you claim the American Opportunity Tax credit you can only do it for four years per child. So if you claim it their first semester of their freshman year, that is one tax year. Therefore, once you get to spring semester of their senior year, you are into a fifth tax year...which you cannot claim. In our case, I did claim it for our oldest daughter for that first semester. Although, we didn't use the full amount, but my guess is as tuition increases through the year and our educational savings options run out we would benefit more in that final semester. I think there is still the Lifetime Learning Credit that can be taken indefinitely and combined even if you have another student still eligible for the AOTC. (There are income limits, so don't assume you are eligible based on the information I provide here. Do your own research for your specific situation)
I also have to remember that I can adjust withholding later in the year as we have more information...such as the amount we have actually paid out of pocket for college expenses that could be claimed.
Hmm...another thought I may actually take the Lifetime Learning Credit for my youngest this year, since it will be for just one semester. Then finish up using the American Opportunity Credit for our oldest daughter for 2018. The following year we could swap these. I think that could work. That would lower our taxes even more. I sure would rather the money go to pay tuition, than to the government who is overspending as it is with our tax dollars.
Have you done the calculations for your 2018 taxes? Did you have to change withholding? Will your taxes be less?
February 7th, 2018 at 05:39 pm 1518025198
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February 8th, 2018 at 01:58 am 1518055093
Wait til the IRS withholding calculator is updated and check there.
February 8th, 2018 at 02:01 am 1518055266
February 8th, 2018 at 06:09 pm 1518113363
I'm so confused by the new law that I think I'm just going to bring a recent paystub and see if the tax guy will weigh in on what he thinks I should do with our withholding. I also need to ask him about that pass-through business tax break and see if AS will be eligible for it and how to set it up (and whether to change our quarterly payments) if she is.
February 8th, 2018 at 07:08 pm 1518116882
February 8th, 2018 at 07:51 pm 1518119469
This may help explain more.
February 8th, 2018 at 08:13 pm 1518120788
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