How to Estimate 2017 Taxes
As the year comes to a close, it is important to start thinking about your taxes for the upcoming year. Estimating your 2017 taxes can help you plan your finances and ensure that you are prepared for any potential tax liabilities. Here are some steps to help you estimate your 2017 taxes:
1. Gather all necessary documents: Collect all relevant financial documents such as W-2 forms, 1099 forms, and any other income statements. These documents will provide you with the necessary information to estimate your taxes accurately.
2. Calculate your income: Add up all your sources of income for the year. This includes wages, salaries, dividends, interest, and any other income you earned during the year.
3. Determine your deductions: Deductions can significantly reduce your taxable income. Some common deductions include mortgage interest, state and local taxes, medical expenses, and charitable contributions. Determine which deductions apply to your situation and calculate the total amount.
4. Estimate your tax bracket: The tax bracket you fall into will determine the percentage of your income that you will owe in taxes. The IRS provides tax brackets for different income ranges. Determine your taxable income and refer to the tax tables to find out your federal tax rate.
5. Calculate your tax liability: Multiply your taxable income by your tax rate to estimate your federal tax liability. Additionally, consider any state and local taxes that you may owe.
6. Consider credits: Tax credits can help reduce your tax liability further. Some common credits include the child tax credit, education credits, and earned income credit. Determine if you qualify for any credits and subtract them from your tax liability.
7. Account for withholdings: If you are an employee, your employer withholds taxes from your paycheck throughout the year. Take into account the amount of taxes already withheld and subtract it from your tax liability. This will give you an estimate of your tax refund or additional tax payment.
8. Review and adjust: Finally, review your estimates and make any necessary adjustments. Consider any changes in your financial situation that may affect your taxes, such as a new job, marriage, or the birth of a child.
Frequently Asked Questions:
1. Can I use last year’s taxes to estimate my 2017 taxes?
It is generally not recommended to use last year’s taxes as a basis for estimating your current year’s taxes. Your financial situation may have changed, and tax laws are subject to change as well.
2. How accurate will my estimate be?
Your estimate may not be 100% accurate, as unforeseen circumstances can affect your tax liability. However, it will give you a good idea of what to expect and help you plan accordingly.
3. Is it necessary to estimate my taxes?
While not mandatory, estimating your taxes allows you to plan your finances better and avoid any surprises when it comes time to file your tax return.
4. What if my financial situation changes during the year?
If your financial situation changes significantly, it is advisable to recalculate your estimated taxes to ensure accuracy.
5. Can I estimate my state and local taxes as well?
Yes, you can estimate your state and local taxes by using the same steps outlined above. Each state may have different tax rates and deductions, so be sure to consider the specific rules for your state.
6. What if I have multiple sources of income?
If you have multiple sources of income, be sure to include all of them when calculating your total income.
7. What if I am self-employed?
If you are self-employed, estimating your taxes can be more complex. Consider consulting a tax professional or using tax software specifically designed for self-employed individuals.
8. When should I start estimating my taxes for 2017?
It is recommended to start estimating your taxes as early as possible in the year to allow sufficient time for planning and preparation.