![]() Losing deductions for home mortgage interest or student loan interest because you’ve paid those obligations off. ![]() Reporting capital gains from the sale of investments.Taking Social Security benefits for the first time.No longer being able to claim a child as a dependent.Underpaying estimated quarterly taxes if you’re self-employed.Other situations that may affect your state tax filing include: Either way, that could affect your state tax liability and cause you to owe more money. Or you might end up taking the standard deduction instead. Having fewer deductions than in previous years, for example, could mean you have less to itemize. Your Deductions: The deductions you claim and whether you itemize or take the standard deduction can also affect your state tax bill.If you can no longer claim that credit on your federal taxes you could lose any similar state tax benefits. For example, say you previously qualified for the federal Earned Income Credit but thanks to a pay raise, you’re no longer eligible. Income Change: Changes in income can also affect your ability to claim certain tax credits.Using an online paycheck calculator can help you get an idea of what you should be withholding. If you haven’t updated your withholdings in some time, you may need to adjust them to avoid owing state taxes in the future. Again, withholding too little in taxes can result in owing money to the state tax authorities when it’s time to file. Your Withholding Is Too Small: Next, consider what you withheld from your income during the year.That could result in owing more money in taxes. If your income changed significantly and you earned more than in previous years, this could push you into a higher tax bracket at the state level. State Taxes are Different: Again, the first thing to keep in mind is that state and federal tax laws and tax brackets work differently.Here are the four most common reasons that you might owe state taxes: Getting a state tax bill may come as a surprise but there are several reasons why you may owe money, versus getting a refund. Again, whether you owe state taxes or get a refund can depend on how much you paid in tax throughout the year. The tax bracket you land in at the state level can differ from your federal tax bracket, which is one reason you might owe state taxes but not federal. This return determines what you owe in state income taxes, based on your income and which tax deductions or credits you claim. If you live in a state that assesses income tax, then you’ll need to file a state return along with your federal return. If you paid too little in withholding then you may owe additional tax. So what determines if you owe federal taxes or get money back? If you paid too much in taxes during the year through payroll withholdings, then you may get a refund. The information you provide on your federal tax return determines what you owe in federal income tax. While there are some exceptions, the IRS requires most people to file a tax return. First, federal taxes apply to everyone, regardless of which state you live in.
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