Tax Withholding Question

[monsterz]

H starts his new job next week and I am thinking it might make sense for him to have as little with held from his paycheck as possible.   Based on my calculations if he claims 5 allowances that results in an extra $200 a month take home for us.  We are eligible for the adoption tax credit in 2015 this is not a refundable credit, it only applies if we have a tax liability in 2015.   The amount of the credit would more than cover any tax liability based on this withholding.  

With me not working I feel having an extra $200 a month would be helpful and that way we can take advantage of this credit.   Is this a bad idea?   

[tealblue]

I feel like you might be a little confused. Tax liability is your (adjusted gross income - your standard (or itemized) deductions - your exemptions) times your tax rate. It has nothing to do with withholdings. If you have a tax liability then your credits are taken against that.

Your withholdings cover tax liabilities. Overwithholding (getting a refund) or underwithholding (owing) has to do with how much was withheld less your tax liability.

Does this make sense?

[sicilygirl]

If you're confident that the adoption credit will wipe out the entire liability, then I don't see why you shouldn't do it.

[monsterz]

Mar 4, 2015 16:24:22 GMT -5 sicilygirl said:

If you're confident that the adoption credit will wipe out the entire liability, then I don't see why you shouldn't do it.

I think between the tax credit and what we have already had withheld this year the tax liability would be wiped out and we would not owe any taxes next year.  

[Poppy]

I think it's ok, but you may want to reevaluate if/when you start a new job.

[FishChicks]

In keeping with what tealblue said, as long as your tax liability is greater than the credit, you'll get the adoption credit even if you withheld so much from your paychecks that you don't owe additional taxes at tax time. The only case where you wouldn't get it is if your liability is less than the credit. That said, if you're confident in the numbers you've run or prepared to deal with a tax bill in 2016, I think changing withholding is reasonable.

[mrsfarmer]

We did this and have a carryover to this year.

[monsterz]

Mar 4, 2015 17:49:47 GMT -5 Poppy said:

I think it's ok, but you may want to reevaluate if/when you start a new job.

I definitely plan on doing this, if I have to withhold a little extra I will.