Originally Posted by Senator
As my final calendar year winds down, I am maximizing my federal and State income tax deductions. I already pay a bunch extra so I do not have to make quarterly payments.
I increased my withholding so I will pay an extra ~$10K to the feds and an extra ~$5K to the State over what I paid last year.
I do not like giving the Government any more than I have to, but pushing income to next year via extra withholding might save a bit in taxes in the long run.
If you are on your last year, it may be something to consider. I see some people wondering of their employer will delay payments to the next year, here is a way to do it yourself.
Final Year Tax Withholding Strategy
Just a quick update in this strategy (or saga). I do not send in any estimated taxes for my rental income, I just do extra withholding at my job.
I do itemize my taxes, so I was able to deduct my extra MN withholding from the Federal taxes, and that income will divert to 2017. The extra Federal taxes did not matter to my amount paid, or what year my income was attributed to.
In the end, I actually did the right thing, probably. I thought I paid an extra $10K in Federal taxes, and I will get back $2,583. About 7% of what I paid in. My effective federal tax rate is 19.33%. So I would have had to pay in quite a bit if I didn't do the extra. And more income would have been in the 28% bracket, rather than the 25% bracket. So saving 3% on ~$3K is about $90 (about what it costs to mail in all my tax returns; 11 returns, 6 envelopes, all certified mail, return receipt).
My State taxes, I thought I paid an extra $5K, and I will get back $3,059, so I was a bit closer on the overage of estimated taxes. That is about 20% of what I paid in.
So, in the end, the extra withholding was a good thing. I did delay/save some federal taxes for 2016/2017. And the amount I did send in, I almost needed to send in anyway... And no penalties, although I would have sent more taxes in in 2015 than I did in 2014 with my regular amount.
It's been 6+ weeks, no money back yet. I did get the return receipt, so I know they received them. And it's direct deposit, so it will just show up soon, I think. The refund site is not much help.