How Your IRS Income Tax Refund is Calculated

Many US taxpayers look forward to receiving their tax refunds during the tax season. However, if you have never prepared your own tax return, it can be mysterious as to how the refund amount you receive is determined. The good news is the process is easy.

tax refund calculator

Once your taxable income has been determined, a tax table is used to figure out how much income tax you have for the year. Then, that number is compared to the amount of money that you paid throughout the year.

If you paid more than your tax, you will receive a refund for the amount over. However, if you did not pay enough, you will be expected to pay money rather than receive money back.

Withholdings Explained

When you work for an employer, you have a portion of your salary withheld from your paycheck. The government does this so they can be 100% positive that they are going to get their money. They understand that individuals run through money, and if they take it before you have the chance to spend it, they will have nothing to worry about.

The amount that you have to pay is based on an estimation of the amount of taxes you will owe when the end of the year arrives. Your employer bases the amount off your estimated annual income and your exemptions. It is very important that you keep your W-4 form up to date so you can have the correct amount of money being withheld from your paycheck each pay period.

How Withholdings Are Determined

You may or may not be aware of which tax bracket percentage you are in. If you are aware, you also may have noticed that your employer withholds more money than the tax bracket requires too. However, this is because they also factor in social security, Medicare, and state taxes.

Social security taxes take up 6.2% of your earnings, while Medicare taxes takes 1.45%. Therefore, before any money is taken out for income taxes, you have already had 7.65% of your income withheld.

Determining Your Refund Amount

The refund amount that you will receive is determined by analyzing the income tax and the federal income tax that was withheld throughout the year. In the event that you had too much federal income taxes withheld from your paycheck, you will receive a tax refund during tax season. Here is a free tax refund calculator.

Recap

Each year your refund is determined based on your w2 amount and how much you paid in federal taxes from your paycheck throughout the year. The amount you owe is determined when you file taxes, and if you have paid too much, you will receive a refund.

Additionally, the majority of the money that you have taken from your salary is not going to paying taxes. Instead, it has to go to state taxes, Medicare tax, and Social Security tax. In addition, keep in mind if you have a premium through your employer, money could be taken out for that, which makes the amount of money coming out of your paycheck even higher.

Student Tax Credits to Take Advantage of

If you or someone you claim on your tax return is going to college this fall, some of your costs could save you money when tax season kicks off. You may be eligible for a tax credit on your federal tax return. Therefore, today, we are providing you with tax credits and tips for back to school season that will benefit you during tax time.

American Opportunity Tax Creditstudent tax credits

This tax credit is worth up to $2,500 annually for eligible students. However, the American Opportunity credit can only be claimed during the student’s first four years of higher education. 40% of the tax credit is refundable. This means that you could get up to $1,000 of the credit back as a refund if you are eligible to receive it.

Lifetime Learning Credit

This tax credit is worth up to $2,000. It does not come with limitations like the American Opportunity Tax Credit, which means you can claim it as long as you are an eligible student.

One Credit per Student

When claiming tax credits, keep in mind, you are only eligible to claim one credit per year. However, if the student happens to be your dependent and you have more than one dependent that qualifies, you are able to claim one credit for one student and the other credit for the other student.

Qualified Expenses

Qualified expenses are used to determine your credit. Qualified expenses include things such as the cost of paying your tuition, fees, and other student-related expenses. For more information on the rules for each credit, visit the IRS website.

Eligible Educational Institutions

Eligible schools are those that offer education after high school. Most colleges and universities make the cut, and some vocational and post-secondary schools qualify. If you are unsure if your school qualifies, ask your school or see if your school is listed on the U.S. Department of Education’s Accreditation database.

Form 1098-T

Usually, you will receive Form 1098-T from your school by February 1st. This form reports your qualified expenses to the IRS. The amount shown can differ from what you paid. For example, your textbook costs may not appear on the form.

However, you are able to include those costs, usually, when you figure out your credit. Additionally, keep in mind that you can only claim the qualified expenses that you paid for during the tax year you are filing for.

Non-Resident Alien

If you are in the US on an F-2 Student Visa, you will generally be treated as a nonresident alien when it comes to filing your taxes. To find out more about this status, visit the U.S. Immigration Support website. To learn more about restrictions, you may experience visit IRS Publication 519.

How to Claim Your Student Tax Credits

Remember, when you file your taxes online, you don’t need to know which schedules to fill out. We’ll ask you simple questions about your life and put your answers on all the appropriate forms.

You’ll get step-by-step instructions through your taxes, expert help when you need it, and every deduction and credit that applies to you. We help you claim every student tax credit possible.

Lifetime Learning Tax Credit – Expenses That Qualify

The Lifetime Learning Credit is for those who attend college classes. It allows them to get a 20% tuition expenses credit with a phase-out limit of $2,000 in tax credits on their first $10,000 of lifetime learning credittuition expenses.

This credit is for you, your spouse, or your dependents that are in an eligible school, and you had to pay the expenses for them. It differs from the American Opportunity Credit because you do not have to be in the first four years of undergraduate classes. People who have taken only one class can qualify to claim the lifetime learning credit.

Educational Institutions that Qualify

Accredited schools are considered eligible. Additionally, post-secondary schools and vocations schools qualify too. If the school accepts federal student aid programs via the US Department of Education, you can claim the Lifetime Learn tax credit for the tuition that you paid.

Expenses That Qualify

Expenses that are eligible for this credit include the fees and tuition that were paid for schooling. However, anything outside of that such as health, insurance, room and board, books, etc. are not eligible for the credit.

Additionally, you have to be the person who is responsible for covering the cost. You also have to reduce your qualifying expenses by the amount of assistance you received from various things, such as grants or reimbursements. If you borrowed money, such as from a student loan, you do not have to include this.

Who Is Eligible for This Credit

If you have a dependent child in college, you can claim this credit on your federal tax return. However, if your college student is not considered your dependen,t they are the ones who claim the credit on their federal tax return. In the event that you do not have a dependent but you pay their college expenses, you are not eligible for the tax credit.

Taxpayers could get $4,000 if they earned under $65,000 and under $130,000 for couples. However, if your income is between $65,000 and $80,000 or $130,000 and $160,000 for couples the maximum amount you will receive is $2,000.

Income Limitations on the Credit

  • To claim the full credit, your MAGI, modified adjusted gross income must be $66,000 or less or $132,000 or less if you are married and filing jointly.
  • If your MAGI is between $56,000 and $66,000 (between $112,000 but less than $132,000 for married filing jointly), you receive a reduced amount of the credit.
  • If your MAGI is over $66,000 ($132,000 for joint filers), you cannot claim the credit.

MAGI, for most people, is the amount of AGI, adjusted gross income, shown on your tax return. On Form 1040A, AGI is on line 22 and is the same as MAGI. If you file Form 1040, AGI is on line 38.

How to Claim the Lifetime Learning Credit

If you file your taxes online, they will make sure you get the maximum amount of money possible when claiming the lifetime learning credit. This results in you receiving your largest refund ever!

What is the Student Loan Tax Deduction?

student tax credits

The student loan tax deduction is your chance to get $2,500 off your interest payments. This is the maximum tax-deductible amount. There are strict limits involved with whether you can claim this credit, though, so you need to be aware of that.

For example, if you earn more than $135,000 as a single taxpayer, you’re not entitled to any deduction.

We’re going to answer some of the most frequently asked questions about this deduction and how to claim the student loan tax deduction.

What About Student Tax Credits?

student tax credits

There are student tax credits available, but you can only claim one of them. The two big student tax credits are the American Opportunity Tax Credit and the Lifetime Learning Tax Credit.

The American Opportunity Tax Credit provides you with $2,500, and the Lifetime Learning Tax Credit offers a credit of $2,000. But the American Opportunity Tax Credit has stricter requirements as you need to be studying towards a degree or certification and must be enrolled at least half time.

The Lifetime Learning Tax Credit only requires you to take a single course every year, and you don’t need to be studying towards a degree or certification.

Do keep in mind that you must be enrolled at a school eligible for the Federal Student Aid Program.

Are Full-Time Students Tax Exempt?

Not at all.

Full-time students are eligible for several tax credits and deductions, but you’re still required to report all earned and unearned income to the IRS.

Many students work half time jobs, and that income remains eligible to be taxed, even if you’re eligible for tax credits, and your actual tax burden is $0. Plus, by not filing, you may be missing out on a refund.

Don’t make this mistake, or you may find yourself being fined.

Other Student Tax Breaks and Write-Offs

In addition to the two primary tax credits for students mentioned above, there are a few other student tax breaks and write-offs available.

There’s the $2,500 tax credit for student loan interest payments mentioned before. You can also deduct $4,000 per year on your tuition fees.

It is recommended that you talk with your parents before claiming a credit, however. College students can usually take just one tax credit. However, the parents of college students can take additional tax breaks for you, if you fall within the relevant guidelines.

Try the Student Tax Deduction and Credit Calculator

Want to know how much you’re entitled to when it comes to student tax deductions and credits?

Make it easier with this education credit finder/calculator. Answer some basic questions, and the calculator will plug in the relevant information.

The calculator will tell you which credits you’re eligible for and how much you should get to maximize your tax refund.

Where Do I Get a Student Loan Tax Form?

The correct tax form for student loans is Form 1098-E. If you’ve paid more than $600, you’ll automatically receive this when the tax season begins.

There are other forms for claiming the relevant tax credits. The main one is Form 8863. You need to request this, however.

How to Claim Student Tax Credits and Deductions

The best way to claim your student tax credits and deductions is to use online tax filing. They have all the necessary forms, and they’ll be able to tell you which forms you need.

Just fill in your information, and it will populate the necessary forms for you.  You can also speak to a tax expert who will offer you advice and review your tax forms for you.

What is the Earned Income Credit (EIC) and How to Qualify

The Earned Income Tax Credit, also known as the EIC and EITC, is a tax credit for individuals who only make an annual income that is considered low or moderate. Your filing status and your income determine the amount of the credit.

If you are able to qualify for the credit, your federal taxes will be lower, and you may get a nice tax refund. However, to qualify, you have to file a tax return even if you are not legally required to do so.earned income credit eic

General EIC Requirements

  • Your income must be within the EITC income limits
  • You and your qualified dependents have to have a social security number that is valid
  • You cannot file with the filing status married filing separately
  • Your investment income cannot exceed $3,300
  • You have to be a citizen/resident alien for the entire year
  • Your earned income has to come from self-employment or employment.


If you
file your taxes online, they will help you to claim the earned income credit based on the information that you enter into the system

Claiming the EIC If You Do Not Have Dependents

If you do not have any dependents, you may still be eligible for the credit. Those who have dependents will receive more; however, some people qualify without dependents.

Which Dependents Qualify?

The IRS uses qualifying children when it comes to determining the amount you will receive for the credit. In order for a child to be considered a qualifying child for this tax credit, they must be a relative, have a social security number, and meet the age, residency, and relationship criteria’s.

This means they have to be your son, daughter, foster child, stepbrother/sister, adopted child, or a descendant from them. In addition, they have to be under the age of 19 unless they are a student, then they have to be under the age of 24.

If the child is disabled, there is no age limit. Furthermore, you cannot claim more than three qualifying children.

Are There Age Limits Regarding EIC Eligibility

If you and your spouse file married filing jointly, you could qualify as long as you are over 25 and under 65 if you do not have any qualifying children. If you have a qualifying child, there is no age limit.

Keep in mind that if you file your taxes online, you only have to answer a few simply questions to see whether you can claim the earned income credit. This means that you will not have to know the current tax laws, and you will be able to get your maximum tax refund.

How to Get Your W2 Form Online

Tax season will be in full swing come mid-January, which means that taxpayers are trying to get all of their financial documents in order with the hope that their refund will be as large as possible. get w2 form online

When you start to file your taxes, there are a few important documents that you are going to need, including your W-2 Form.

There should be no problem getting your W-2, however, because each company that you worked for during the year is responsible for sending it to you before January 31.

Who Has Access to W-2’s Online?

Not all taxpayers will be able to get their W2 forms online. Only taxpayers who have employers who use payroll services will have online access to their W-2’s. The best part is if you use TurboTax or H&R Block, they will import the information for you instantly and make for a speedier tax return. You can find and import your W2 online by using either one of the two following links.

Find your W-2 with TurboTax

Find your W-2 with H&R Block

What Happens if You Move and Miss Your W-2?

Quite a few taxpayers miss their tax documents because they have moved, and the documents go to their old addresses. If you are able to access your W-2 online, this will not be a concern. Furthermore, when you have online access to your tax documents, you can get them faster than you would waiting on snail mail. This means you can be ahead of all of the taxpayers who have not received their documents in the mail.

When you get your W-2 form online, you will be notified via email once they are available. After you access them, you can download and print them whenever you need to access them. This allows you to eliminate trying to keep your documents in a safe place or misplacing them.

The bottom line is if you get your W-2 form online, you will get the same information that you receive in the mail, but online versions come with more benefits. In fact, the only difference between the forms is one is digital. Nevertheless, as with your mailed W-2, you will want to make sure that the information is correct. Important things to check are your name and social security number.

What to do if Your W-2 Information is Incorrect

If you find that, there is an error on your W-2, you need to contact your employer to have it fixed. They have sent this information to the IRS already, who will be expecting you to send information that matched the document or provide an explanation.

Additionally, if your W-2 has not arrived yet, you have to find out what the holdup is, even if it is just a small amount of money. The IRS will have the W-2, and they will want answers as to why you did not file it.

Importing Tax Information into Your Tax Return

If you decide to get your W-2 online, you will find it is a breeze to keep track of your tax information. If you have not gotten your W-2 online and it is available, you should definitely consider doing so.

We recommend that you get your W2 and file your income taxes with H&R Block or TurboTax online because they will both import your W-2 information into the correct form to ensure that tax filing is as easy as possible. By going with their online software you decrease the chances of your tax return containing errors, and they guarantee that you will get the largest refund ever or pay the minimum amount of taxes possible.

The TurboTax TaxCaster Helps You Calculate Tax Refunds

The beginning of tax season is near, and it’s time to get those tax papers in order. If you have all your files organized, you may be eager to get jump-started on figuring out your refund or owed amount.

tax refund calculator taxcaster

Fear not, the TurboTax TaxCaster was built to give you the opportunity to see how much your tax refund is in advance.

One of the amazing benefits of TaxCaster is that you can use it anonymously throughout the tax year since it asks you zero personal identification questions.

This tool provides you with a tax calculator that takes your income and tax deductions into account to provide you with the most accurate result.

One of the most crucial aspects of your income taxes comes down to one thing.

Calculating Tax Deductions

Essentially, your tax deductions give you an allotted amount of money to be “free” before the IRS begins to tax you. Depending on both the local and state income tax liability, you can easily calculate your taxes throughout the year.

Taking over 305 different variables into consideration, the Turbotax TaxCaster will consider all your deductions when looking for the best tax solution for you.

The deductions claimed most include:

However, these are the deductions missed by most:

It Helps Calculate Tax Exemptions

Tax exemptions are one of the specialties of the Turbotax TaxCaster. It helps with lowering the federal amount owed. This includes:

  • Local city exemptions;
  • Personal exemptions;
  • County exemptions;
  • State exemptions; and
  • Dependent exemptions.

The TurboTax TaxCaster is Also an Income Tax Calculator

The technology in the TaxCaster gives it the power to calculate the net of your taxable income. It does this by subtracting your tax deductions from your tax exemptions. This will prompt it to generate your overall refund or owed amount. It takes all your quarterly payments and withholdings along with applicable tax credits and subtracts it from the amount owed.

Using the TaxCaster for AMT Tax Calculations

You also need to consider whether your Alternative Minimum Tax (AMT) is applied to your tax calculation. This will determine the amount of tax owed to you or owed to the state.

Adjusted items, called itemizations, is calculated per a number of medical expenses, depreciation, charitable donations, and other itemized deductions. For each person, whether an individual, a trust, corporation, or even estate, there is a flat rate on the threshold allowed for taxable income.

If your income stands above the AMT exemption calculation, you will pay that amount if it’s higher than the standard federal tax.

Use the TurboTax TaxCaster iPhone App or Online App

You can use the TurboTax TaxCaster by going online or going into the Apple or Google store and downloading the TurboTax TaxCaster App to use it on the go.

It’s a great tool to have in your artillery as you suit up for tax season.

100% Satisfaction Guaranteed

Turbo Tax guarantees that you will have accurate taxes filed and receive the largest refund possible when filing with them. Import your w2 online and start your taxes today for free. Only pay when you are ready to print or eFile your taxes.

Educational Tax Deductions and Credits

The cost of education is always rising. However, if you are someone who wants to grow your knowledge base, you will be happy to know that education tax deductions and credits can help education tax deduction credityou with the costs of your education.

One of the tax credits is the American Opportunity Credit, and another is the Lifetime Learning Credit. These credits allow you to reduce your tax dollars, dollar for dollar when you claim educational expenses on your federal tax return.

American Opportunity Credit

This credit allows you to reduce your taxes up to a maximum of $2,500 per student for the educational expenses endured for the first four years. However, students have to attend at least part-time and not have been convicted of a felony drug crime.

Various things qualify for this tax credit, such as books, equipment, supplies, tuition, and other school-related fees. In the event that your taxes are less than $2,500, the refund cut off amount is $1,000. However, those who make more than $80,000 or couples who make more than $160,000 will receive a low credit amount. The phase-out limit for the credit is $90,000 in income or $180,000 for couples.

Lifetime Learning Credit

You do not have to be actively pursuing a degree in order to claim this credit. This credit is for anyone who is taking a course to further his or her education. It covers required tuition, equipment, and books. It allows you to claim a maximum amount of $2,000 on each tax return. However, if the amount granted is more than your tax bill, you will not receive a credit in the form of a refund.

Additionally, the phase-out limit is $66,000 or $132,000 for couples. Those who make more than $56,000 or couples who make more than $112,000 will receive a lower credit amount.

Educational Tax Deduction

Tuition and fees deduction, student loan interest, work-related education, scholarships, and fellowships can allow you to ease some of your educational, financial strains too.

Tuition and Fees Deduction

If you are unable to claim the Lifetime Learning Credit because of the phase-out limit, you can claim the Tuition and Fees Deduction of up to $4,000. This is true even for taxpayers who do not itemize their tax returns. As long as you do not make more than $80,000 or $160,000 for couples, you are eligible. However, you are unable to claim both a credit and a deduction simultaneously.

Student Loan Interest

Even if you do not itemize your deductions, you can deduct your student loan interest on your taxes. This deduction does not phase out until $2,500 per tax return. However, you must not exceed $60,000 in income or $125,000 if you are married. Furthermore, if you have cash in US savings bonds to pay for your education, the interest is tax-free as long as the cash is used for your education.

Try the Education Tax Credits Calculator

Education tax credit calculator

The Education Tax Credit Calculator will give you an accurate view of how much you could be entitled to. Just answer some simple questions regarding your income and your living circumstances, and you’ll get a readout on how much you may be eligible for.

Work-Related Education

If you are going back to school due to your job, you may be eligible to claim this itemized tax deduction. However, you have to prove that the education was to maintain or improve your work skills or a requirement from your employer. However, this deduction is not for those who have to do it to land a new career.

Scholarships and Fellowships

If you receive a scholarship or a stipend for a fellowship, it is tax-free if you use the funds for tuition, supplies, or other school-related expenses. You do have to be a degree candidate though.

Closing Thoughts

If you are a student, you should file your taxes online. They will make sure you get the credits and deductions that you qualify for in addition to making sure that you receive the largest tax refund possible.

New Homeowner Tax Deduction Tips

Congrats on becoming a homeowner. We know you want to get your home customized to your liking, but it is important to keep track of your expenses and finances since your tax situation has now changed. Therefore, today, we are going to provide you with some new homeowner tax deduction tips so you can take advantage of all of the benefits that come with getting a new homeowner tax deduction tipsslice of the American dream.

Home Mortgage Interest & Points

This will probably be your largest itemized deduction.

Qualified mortgage interest means that you paid interest on a mortgage, which is secured by your main home or second home that is not used for rental or business activity. You can claim a mortgage interest tax deduction, but it can be limited by the amount of the loan and the use. However, your income does not limit it.

For example, the mortgage interest deduction for a loan that was used to buy, build or improve your home is limited if the loan balance exceeds $1 million ($500,000 for separate tax filers). For home equity loans that were not used for home improvements, the deduction is limited if the loan balance is more than $100,000 ($50,000 for separate filers).

Amounts that are points are also deductible, but only in the year, they are paid and if the loan is secured by the main home and the proceeds were used to purchase, build, or improve the home. The points must be spread over the life of the loan if they were paid in place of amounts that ordinarily stated separately on the settlement statement.

Real Property Taxes

Real property taxes are deducted on Form 1040, Schedule A. In order to be deducted; they have to be assessed as a percentage of the value of the home. In addition, they must go into the taxing authority’s general fund. If they were paid in exchange for a special project that increased the value, they cannot be deducted.

Usually, when they are nondeductible, they will be referred to as “Special Assessments.” An example of this would be an economic development project. In addition, homeowner associated dues are not deductible.

When you pay real property taxes for closing the sale, the deduction is split between you and the seller. You can only deduct property taxes, which are allocated to the part of the year you own the property. If you pay the seller real property taxes, that payment is included in your cost basis and is not deductible.

Recordkeeping

It is crucial that you track your basis in the property. This is your investment in the property. The points and purchase price and amounts paid as part of the closing. Even if a portion of the purchase price was paid with borrowed money, you need to track it. Your basis increases by amounts paid for home improvement. When you sell the home, your gain on the sale is determined by reducing the sale price by using this basis.

If the IRS challenges the property’s basis, you must be able to provide receipts and invoices.

Gain Exclusion

When you sell the home, the gain is taxed at current at capital gain rates. However, if you reside in the home for at least two years out of five years, you may not be taxed on the gains. Additionally, you may be able to exclude up to $250,000 ($500,000 for joint filers) of the gain from the sale of a principle residence as long as you pass the ownership tests.

Lastly, even if you don’t live in the home for two years, certain circumstances, such as moving for a new job, can help you receive a reduced exclusion.

The TurboTax Tax Refund Calculator is Free to Use

Wouldn’t it be nice to know in advance how much of a refund you’ll be getting back from the IRS? The good news is thanks to the TurboTax calculator you can know in advance how much you’ll get back in taxes in 2020 and it’s super easy to do so.

TurboTax tax refund calculator

Turbo Tax has created a handy tool that will allow you to know how much of a tax refund you can expect to get back before you file your tax return. The best part is you can use it for Free!

How to Estimate What Your Tax Refund Will Be

All you have to do is answer a few questions regarding your marital status, wages and withholdings, children/dependents, homeownership, and a few others, and the TurboTax estimator, calculator will do the rest.

Then, after all of your information has been entered, the calculator will give you a total of how much your refund will be or how much you may have to pay in taxes.

Try the TurboTax Refund Calculator for Free!

The TurboTax TaxCaster calculator is up to date with all the latest tax deductions and credits for your tax return.  You can try the TurboTax Calculator for Free even if you don’t use TurboTax to file your taxes.

When you provide them with your information, they do the math, and their results are 100% accurate. Additionally, you can put your faith in Turbo Tax because they always know the current tax laws, including health care, so your tax return will contain no errors as long as you are accurate when providing them with your information.

The Calculator Can Help You Get a Bigger Refund

bigger tax refund

One of the greatest benefits of being able to see what the upcoming tax season holds for you can make the appropriate adjustments to get the largest tax refund. For example, you can figure out ahead of time if it would be in your best interest to take the standard deduction or to itemize. You can also see how much of a refund you get for having children.

Imagine if you had already filed your taxes then learned that you could have gotten a better outcome if you would have itemized your deductions instead of taking the standard deduction. You would have missed out on a bigger refund or maybe paid less in taxes.

Tips for Using the TurboTax Calculator

Before you use the tax refund calculator, you are going to want to make sure that you have all of the information available to ensure that the estimate is as close to accurate as possible.

You should know which filing status you plan to use as well as your number of children who you can claim, as you may be eligible for the Earned Income Credit and the Child Tax Credit. Your income, payments, retirement information, business income, and charitable deductions also need to be handy.

If you do not have all of the information available, however, the calculator can still provide you with an estimate as to what you can expect to get back in your refund.

How Much Will I Get Back in Taxes?

The TurboTax tax refund calculator is a great way to see the amount of your tax refund in advance. The best part is, it’s free, so you have absolutely nothing to lose!