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How to Calculate Your Tax Withholding

Understanding how to calculate your tax withholding is crucial for managing your finances effectively. At O1ne Mortgage, we are here to help you navigate through this process. If you have any mortgage service needs, feel free to call us at 213-732-3074.

1. Open the IRS Tax Withholding Estimator

The IRS tax withholding estimator is a useful tool that helps you estimate your federal income tax. By entering your information, you can see how your withholding amount impacts your net earnings, tax refund, or tax due. It’s advisable to recalculate your withholding if you’ve experienced significant life changes such as getting married, having a child, buying a home, or changing jobs.

2. Gather Your Documents

Before using the IRS tax withholding calculator, make sure you have the following documents:

• Pay stubs for all your jobs (and your spouse’s if applicable)
• Information on other income sources like self-employment, side gigs, and investments
• Your most recent tax return

3. Enter Your Personal Information

Start by clarifying your tax-filing status, which could be:

• Single
• Married filing jointly or separately
• Head of household
• Qualifying widow(er)

You’ll also need to indicate if you have any dependents and whether you have a job or pension that withholds federal income tax.

4. Factor in Your Income

Enter information about any job you’ll receive income from this year, including salaried positions and hourly jobs. Also, include other income sources such as self-employment, investment income, and unemployment insurance. Don’t forget to enter the amount of taxes already withheld from these sources and any estimated tax payments you’ve made.

5. Make Income Adjustments

Qualifying for certain tax deductions can reduce your taxable income. You may be eligible to deduct expenses like:

• Student loan interest
• Qualified educator expenses
• Traditional IRA contributions
• Moving expenses (if you’re a member of the armed services)
• Alimony paid (if divorced before 2019)

Decide whether to itemize your deductions or take the standard deduction. In 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. Itemizing makes sense if your deductions exceed the standard amount.

6. Estimate Your Tax Credits

Tax credits directly reduce your tax bill. You may qualify for credits if you are:

• A parent or guardian
• A worker who earned income outside the U.S.
• A college student
• A retirement saver
• A homeowner
• Elderly or disabled
• A business owner
• An owner of an energy-efficient vehicle
• A taxpayer who paid alternative minimum tax

7. Submit a New IRS Form W-4 if Necessary

The IRS tax withholding estimator will show your expected tax withholding and anticipated tax obligation. This will help you determine if you’re on track for a tax refund or if you’ll owe money. Adjust your W-4 accordingly to either increase your take-home pay or ensure you don’t owe taxes. Download and print a new W-4 and submit it to your employer if changes are needed.

The Bottom Line

Calculating your tax withholding is essential for financial planning. Start with the IRS tax withholding estimator to get a clear picture of your tax obligations. For any mortgage service needs, contact O1ne Mortgage at 213-732-3074. We’re here to help you achieve financial wellness.

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