Every time you start working for a new employer, you make an important decision. The number of dependents you claim on your W-4 form can dramatically affect your tax results when you do your taxes in April. Too few dependents, and your employer may take out too much in taxes, leading to a higher refund but lower take-home pay. Too many dependents and you won’t pay enough throughout the year, which may mean an unpleasant surprise in the form of a tax bill.
Fortunately, you can adjust your withholdings at any time during the year. If you make a $60,000 salary, it isn’t too late to think about making those adjustments for the current tax year. Understanding what you’ll pay in taxes can help with that.
When it comes time to declare your tax withholdings, it is important to remember that the IRS Child Tax Credit will provide you with up t0 $2,000 in tax savings per child dependent.
Understanding Marital Status and Deductions
Multiple factors come into play when calculating how much in taxes you'll have to pay the government each year. One of those factors is your marital status, as well as whether you and your spouse file jointly or as a couple. As of 2019, individual taxpayers earning more than $84,200 will be part of the 24% tax bracket, while individuals earning less than $84,200 but more than $39,475 will be part of the 22% tax bracket.
For a married couple filing jointly, it is possible to double the income cutoff levels for a single filer in order to determine which specific taxable bracket they belong to. However, those numbers can be offset by any credits or deductions claimed on your tax return.
Exploring Withholding by Dependent Numbers
To ensure you arrive at the desired refund level at tax time, you’ll likely need to adjust any withholdings to align with tax changes from one year to the next. The W-4 form includes a Personal Allowances Worksheet to help you calculate how many you should claim. If you’re making $60,000, the worksheet directs you to enter “4” for each child. However, by entering “4,” you’re having less withheld from each paycheck, which could result in an unpleasant surprise in the form of a tax bill in April.
Still, having too much withheld and getting a big refund check means you just gave the IRS an interest-free loan. Either way, experts have urged taxpayers to do a W-4 checkup as soon as possible, especially if you’re in a dual-income household. The IRS provides a withholding calculator on its website to help with that.
Examining Other Withholding Considerations
If you have dependents, there are other ways you’ll be able to save at tax time, making your withholdings more complicated. You may think you need to have your full tax obligation taken out of your pay without actually realizing the tax savings you’ll get for parental perks like the Child Tax Credit, which offers up to $2,000 per child dependent. The phaseout for the Child Tax Credit has been increased to $400,000 of modified adjusted gross income for married filers and $200,000 for all others, so at $60,000, you’ll be able to comfortably take the credit.
If you live in a state with income tax, you’ll also need to factor the amount you’ll pay each year for that. If you’re lucky enough to get a raise or bonuses from one year to the next, you should also watch the tax tables carefully to make sure you shouldn’t adjust your dependents to so that you’re paying in enough throughout the year.
- IRS: Early Release Copies of the 2018 Percentage Method Tables for Income Tax Withholding
- The Motley Fool: Will You Get to Claim the Child Tax Credit in 2018?
- Forbes: New: IRS Announces 2018 Tax Rates, Standard Deductions, Exemption Amounts And More
- NerdWallet: Form W-4: What It Is and How to Fill It Out in 2018
- IRS: Form W-4 (2018)
- CNBC: Take These Steps Now to Avoid a Tax Surprise in 2019
- IRS: Publication 15 - Employer's Tax Guide
Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a ghostwriter for a credit card processing service and has ghostwritten about finance for numerous marketing firms and entrepreneurs. Her work has appeared on The Motley Fool, MoneyGeek, Ecommerce Insiders, GoBankingRates, and ThriveBy30.