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Income Tax WorksheetAnswer these questions to understand how your income tax is calculated and what you can do to reduce your taxes. You will need the following documents: Your most recent federal tax returnIf you or your spouse are employed:Last year’s W2Final paystub from last year and a recent paystubLine numbers refer to 2017 tax forms. Some items will change for 2018, and those changes are noted in red. All of these changes will sunset (expire) after 2025 unless extended by future legislation. Employee Benefits Can Reduce Your TaxesLook at your W2 from last year. In Box 1, it shows how much income was reported to the IRS. If that number is less than the “gross income” amount shown on your last paycheck for the year, it means that you avoided paying tax on some of your income by using employee benefits. For example, the amount deducted from your paycheck for health insurance isn’t taxed and isn’t included on your W2. There are other benefits that can save you income tax, too. This is unchanged under the new tax law; these payroll deductions will still reduce your taxable income in 2018 and future years. Which of these payroll deductions are listed on your paystub? Your employer might use different wording for these items. Using these benefits reduces your taxes.Employer BenefitTax Benefit Medical & dental insurance premiumsYou pay no federal or state income tax on this money. Flexible spending accounts: Medical Dependent Care Commuter ExpensesYou pay no federal or state income tax, FICA (Social Security), or Medicare taxes on money you put into these accounts. Generally, you must use all the money in the account by the end of the year. Retirement plan contribution (401(k), 403(b), 457, etc.) You pay no federal or state income tax on this money now. The tax is deferred until you take money out of the account later. If you contribute to a Roth account, it doesn’t reduce your taxes now. But the future growth will be tax free if you leave the money in the account for at least 5 years AND you are at least age 59 ?, dead, or disabled when you take it out. Health savings accountIf your health insurance is a “high deductible health plan” you can put money into a Health Savings Account instead of a Flexible Spending Account You pay no federal or state income tax, FICA (Social Security), or Medicare tax on this money. You can use the money for medical expenses now or in the future. Check your employee benefits handbook or talk to your Human Resources office to see if there are other benefits you could be using. You can start contributing to a 401(k) or other retirement plan, or change the amount, whenever you want. For other benefits, you may only be able to enroll or make changes during your employer’s annual open enrollment period. Get Familiar with Your Tax ReturnLook at your tax return from last year. Use it to answer these questions. It will show you what kinds of income you paid taxes on, and what kinds of deductions you had that reduced your taxes. Line #s refer to 2017 tax forms, and may change on 2018 forms. IncomeLines 7 to 21 on the 1040 are each for different types of income. Which types of income did you have last year? List them below. If you filed a 1040A, look at lines 7 to 14. If you filed a 1040 EZ, look at lines 1-3.____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________Above-the-line deductionsThese are expenses you get to deduct (subtract) from your income even if you don’t itemize deductions (See #4). Did you have any deductions on Lines 23 to 35 of your 1040? List the names of those deductions here. See lines 16-19 if you filed a 1040A. Some deductions are not available if you filed a 1040A; none of them are not available if you file a 1040EZ._____________________________ _____________________________ _____________________________ _____________________________ Adjusted Gross IncomeLine 37 on the 1040 is your Adjusted Gross Income (AGI). Some tax breaks and government benefits are only available if your AGI is below a certain amount. How much was your AGI? (1040A line 21, 1040EZ line 4)$ __________________________________Exemptions and Standard or Itemized DeductionsEveryone gets to have some income that isn’t taxed. Exemptions and deductions both reduce the amount of income that is taxed. 1) Exemptions are based on the number of people covered by your tax return – you, your spouse, and your dependents. For 2017, you get to subtract $ 4050 per person. 2) You can take the standard deduction based on your filing status. Or, you can itemize deductions using Schedule A if you have certain types of expenses that add up to more than the standard deduction, and you file a regular 1040. How much were your exemptions and deductions? Beginning in 2018, there are no exemptions; they have been combined with the standard deduction.1040 1040A 1040EZStandard deductionor itemized deductionLine 40$____________Line 24$____________1040EZ combines these items on Line 5$____________Exemptions – based on the # of people covered by your tax returnLine 42$____________Line 26$____________If you filed a Schedule A, meaning that you itemized deductions, list how much you deducted for each type of expense. Line #Type of expenseAmountChanges beginning in 2018Line 4 Medical & dental expensesExpenses over 7.5% are deductible in 2018, and over 10% beginning in 2019.Line 9Property taxes & either state income tax or sales taxThe total deduction for state/local income taxes and property taxes COMBINED is limited to $10,000.Line 15 Mortgage & investment interestFor new mortgages taken after Dec. 15, 2017, interest can only be deducted on the 1st $750,000 of acquisition debt. No deduction will be allowed for home equity loans regardless of when the loan was obtained, unless it was used to add onto a house. Line 19 Gifts to charityLimit on annual deduction increases to 60% of AGI. Line 20 Casualty & theft lossesIN addition to existing limitations, only if loss is in a Federal disaster area.Line 27 Job expenses, misc.Not allowed beginning in 2018.Line 28 Other misc. deductionsGambling losses include other expenses associated with that gaming activity, not just the cost of wagers.Line 29 TotalCompare Line 29 with the standard deduction you could have taken in 2017: $12,700 for married filing jointly and $6350 for single filers, and an additional $1250 per spouse who is blind or over age 65.How much more were you able to deduct by itemizing? $___________________ That is how much extra income you did not pay tax on, because you itemized. For 2018, the standard deduction will be $12,000 for individuals and $24,000 for married couples,and an additional $1250 per spouse who is blind or over age 65. Will you be able to itemize for 2018? ____ Yes ____ NoTaxable IncomeLine 43 is your Taxable Income (1040A line 27, 1040EZ line 6). This is the amount of income on which you actually pay taxes. You do not pay tax on all of your income. __________________________________Tax CreditsCredits reduce the amount of tax you owe. List any credits you received on lines 48 – 54. (1040A line 31 - 35, 1040EZ line 8a) ______________________________________________________________________________________________________________________________Major changes for 2018: The Child Tax Credit is increased from $1000 to $2000 per qualifying child under age 17, of which $1400 is refundable if you end up owing no tax. This credit phases out at higher incomes than before: $200,000 for single filers and $400,000 for married filing jointly. There is a new $500 credit for non-qualifying dependents, such as children over age 17 who are still claimed, with the same income phaseouts as for the Child Tax Credit. Tax OwedLine 63 is the final amount of tax you owe. How much tax did you owe? (1040A line 28, 1040EZ line2 10 and 12). You should plan to have at least this much withheld next year. If you won’t have this much withheld, you may need to pay estimated taxes each quarter.$ __________________________________Refund or owed more? Did you get a refund, or did you owe money when you filed your taxes? See lines 75 and 78 on the 1040 (lines 47 and 50 on the 1040A or 13a and 14 on the 104EZ). Refund: $ _____________ Owed: $ ______________If you owe more than $1000, you might have to pay an underpayment penalty. You might want to increase the withholding from your paycheck, Social Security, or retirement income. Or you can pay quarterly estimated taxes. If you get a large refund, you might want to reduce the amount withheld from your paycheck or other income. ................
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