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Income, aka "success tax"What qualifies as a tax liability?
Income, aka "success tax"What qualifies as a tax liability?
You got some good answers on the second part of your post, but allow me to tackle this part.I like to get a refund at the end of the year. So I give an additional amount out of my check to taxes.
No, just having a home mortgage doesn't automatically give you enough deduction to beat the Standard Deduction. If you carefully look at your last tax return, you should see what all of your allowable deductions are. IF they are more than the Federal Standard Deduction, that should have been what was claimed.I like to get a refund at the end of the year. So I give an additional amount out of my check to taxes. But the tax person also tells me I don't have enough tax liability to use my home interest deducted. I'm I doing something wrong?
Ok, so looking at my taxes from last year. Line 63 had a total of 11,500To get the full $7500 tax credit, you need to have a tax liability (line 44 or 63 on my 2016 1040) that is greater than $7500. This item comes before you deduct withheld payments on the 1040 (line 74).
To get the full $7500 tax credit, line 63 has to be greater than $7500. Assuming your tax situation doesn't change considerably, you should be eligible for the full $7500Ok, so looking at my taxes from last year. Line 63 had a total of 11,500
Line 64 has a total of 16,300.
So I got a refund. So I got a refund.
So for me to qualify for tax credit,line 63 would have to be greater than line 64?
It would be subtracted from line 63.Thanks for answering my questions. One more,lol.
Line 63 is greater than 7500
So how or where would the 7500 come into play?
Would it be deducted from line 63 or add? And if it's deducted would that mean I get a tax refund?
Line 63 is your total tax liability. If that's greater than $7500, then you would qualify for a full credit.Ok, so looking at my taxes from last year. Line 63 had a total of 11,500
The $7500 would be entered on line 54So how or where would the 7500 come into play?
No, he's saying that your tax liability (that is, what you owe to the government) would only be $4000 instead of $11,500 (because we subtracted $7500).So I only qualify for 4k?
No. Your tax liability would have been reduced from $11,500 to $4,000, thus INCREASING your refund by $7,500 to $12,300. It would have otherwise been $16,300- $11,500 = $4,800.So I only qualify for 4k?
No, that's not they way it works. Adding more withholding does not increase your tax burden. It only increases your refund. To get the full $7500 tax credit, you need to have a tax liability (line 44 or 63 on my 2016 1040) that is greater than $7500. This item comes before you deduct withheld payments on the 1040 (line 74). Look at your 1040 from last year to see if your tax liability after deductions, line 63, was greater than $7500. If your income and deductions haven't changed much from last year, you should get it.
Don't do that. There are better ways to raise your liability.Holy smokes, I'm glad I looked at this. I might have to cut back significantly on my 401k contribution to raise my liability
I'll look into it. I'm not that familiar with Roth 401. I contribute to maximize annual limit on reg 401k, and also contribute to Roth ira, which is really transparent as far as current year taxes go. Any other tips to raise liability?Don't do that. There are better ways to raise your liability.
As I said earlier, convert some of your existing 401k into a Roth 401k. Then you can pull that money out tax-free during retirement.
Future Walt loves current WaltI'll look into it. I'm not that familiar with Roth 401. I contribute to maximize annual limit on reg 401k, and also contribute to Roth ira, which is really transparent as far as current year taxes go.
Given enough lead time and only a bit of ground to make up, switching current 401(k) contributions from regular to Roth will be as effective as converting existing 401(k) balances from regular to Roth--assuming one has the choice of Roth contributions in the 401(k).Don't do that. There are better ways to raise your liability.
As I said earlier, convert some of your existing 401k into a Roth 401k. Then you can pull that money out tax-free during retirement.
Unfortunately my employer does not allow the option of a Roth-401K. They do however allow to contribute to 401k as AFTER TAX, which can be rolled into the Roth as a "back-end rollover?", which I don't fully understand yet. I contribute 100% annual allotment to Roth, hence no traditional IRA therefore your suggestion wouldn't work. One option I've been thinking of is to sell all holdings (aka $TSLA, $NVDA after 1/1/18 and repurchase with the idea to lock in Cap-Gain on those. Also I'm seriously considering selling a rental property next year which may raise my liability by a good amount in itself.Given enough lead time and only a bit of ground to make up, switching current 401(k) contributions from regular to Roth will be as effective as converting existing 401(k) balances from regular to Roth--assuming one has the choice of Roth contributions in the 401(k).
As regards IRAs, the poster mentioned he already contributes to a Roth IRA. If he has any regular IRAs, converting them to Roth IRAs would also effectively raise tax liability in the year of the conversion. You want to make sure the "year of the conversion" is the same year you take possession of the car and earn the tax credit: do the conversion in the same calendar year.
Each dollar of additional income generates x% of additional tax liability, where x = your marginal tax rate (aka, your "tax bracket"): https://taxfoundation.org/2017-tax-brackets/. Keep in mind that capital gains and losses, qualified dividends, Social Security income, and many other things can affect the calculation of total tax liability in unexpected ways. All the advice given so far is assuming "all else is equal" from year to year. Watch out for things that are different between tax years.