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Updated Dec 18, 2023

Tax Refund Calculator

Sally Herigstad
Sally Herigstad, Business Operations Insider and Senior Writer
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This guide was reviewed by a Business News Daily editor to ensure it provides comprehensive and accurate information to aid your buying decision.

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This calculator helps you estimate your federal tax liability and the amount you will have overpaid or underpaid at the end of the year quickly. The calculator does not include estimated self-employment tax, which you are required to pay with your federal income taxes.

Key terms

Tax filing status

Select your filing status as Single, Married filing Jointly or Separately or Head of Household. You can also choose to estimate your tax liability as a Trust.

Traditional IRA contribution

Enter the total contributions you have made or expect to make for the year. For 2023, your total contributions to all traditional and Roth individual retirement accounts (IRAs) cannot exceed $6,500 per filer ($7,000 per filer if age 50 or older). Your total IRA contributions also cannot exceed your taxable compensation for the year.

Number of dependent children

Enter the number of your dependent children who were under age 17 at the end of the year and qualify you for the child tax credit.

Number of nonchild dependents

Enter the number of your children age 17 or older at the end of the year who qualified as dependents or qualified dependents who are not your children.

Amount of gross income considered ‘unearned’/investment income

Qualified dividends, long-term capital gains and certain other investment income are generally taxed at a lower rate than ordinary income. Enter income that qualifies for the investment income rate here.

Taxable gross annual income subject to ordinary income rates

Enter wages, ordinary dividends (not “qualified dividends), short-term capital gains and other income subject to ordinary income tax rates. Do not include income from pass-through organizations here, such as sole proprietorships or limited liability companies (LLCs).

Itemized deductions

Enter your total itemized deductions, including qualified mortgage interest, charitable contributions and nonbusiness property taxes. Your total deductible taxes (state/local and property) cannot exceed $10,000.

Total company pass-through income

Enter net income after expenses from a sole proprietorship, LLC, partnership or other pass-through entity. Enter 100% of the entity’s income, even if you only own a partial interest in the entity.

Total company assets

Estimate the total company assets that will be reported on the partnership or other entity return for the end of the tax year. For a Sole Proprietorship, leave this blank.

Individual company ownership

Enter your interest in the company (0% to 100%). The total company pass-through income will be multiplied by this percentage.

Total company W-2 wages

Enter the total wages the company paid or will pay for the year.

Tax amount withheld to date

Enter the amount of federal income tax withheld to date as shown on your last pay stub or online pay statement.

What determines whether you get an income tax refund?

The primary factors that influence your federal income tax on a given amount of income are your income, filing status, deductions, other taxes, credits and tax withholding:

Income

As a basic rule, the more money you make, the more federal income tax you will owe. If you earn a lower level of income, you may not owe any income taxes at all. As your income rises, it is taxed at higher percentages until your income tax may consume a significant portion of your earnings.

It is always better to make more money, even if it results in higher taxes. The marginal tax rate is always less than 100%, meaning you always keep part of each additional dollar you earn.

Filing status

Choose the most advantageous filing status for which you qualify. For example, if you are single but may qualify to file as Head of Household, you will pay less tax by doing so.

Deductions

Business deductions not only reduce your federal income tax but your self-employment tax as well. As a small business owner, you may deduct self-employed health insurance premiums and 50% of your self-employment tax.

You may also be able to itemize deductions, such as mortgage interest and charitable contributions.

Other taxes

You may owe other taxes, such as self-employment tax, Social Security and Medicare tax on unreported tip income, additional tax on IRAs or other tax-advantaged accounts or household employment taxes.

For small businesses, the most common additional tax paid with your individual income tax return is self-employment tax, which is not included in this estimator. Self-employment tax must be paid with quarterly estimated taxes and reported on your income tax return. To estimate your self-employment tax, use the self-employment tax calculator.

Credits

You may qualify for credits based on certain expenses, such as how many dependent children you have or child care expenses. You may also qualify for credits if you spent money on activities the federal government encourages, such as energy conservation or if you already paid taxes on certain income elsewhere.

Tax withholding

Your employer withholds tax based on your wages or salary for a given time period, the information on your Form W-4, Employee’s Withholding Allowance Certificate and IRS withholding tables. You can see how much tax has been withheld in the most recent pay period and for the year so far by looking at your pay stub or online pay records.

The more money you make for each time period, the more tax your employer withholds. In theory, this should result in usually having close to the correct amount withheld. However, you may have significantly too much or too little withheld for many reasons. Here are some of the most common reasons for having too much or too little tax withheld:

  • Incorrect Form W-4: Entering the wrong filing status or the number of allowances or failing to update that information when necessary, can result in over- or under-tax withholding.
  • Other income or losses: If you have capital gains or losses or a separate business, for example, your tax withholding may be too much or too little at the end of the year.
  • Variable income: If you work only part of the year or if your wages vary, you may need to adjust your withholding.
  • Large deductions or credits: If you expect to have significant deductions or credits not accounted for on your Form W-4, your withholding tax may need to be adjusted.

Is it better to have more or less tax withheld?

Many taxpayers look forward to receiving large tax refunds when they file their returns every year. They may even feel they’ve “won” or received free money when they get a tax refund check for thousands of dollars.

The best way to win at tax withholding, however, is to have just the right amount of tax withheld from your pay or paid in estimated tax, to cover your tax liability. Having too much income tax withheld throughout the year is not the best use of your income. Meanwhile, you don’t want to owe a huge tax bill at the end of the year, either. Here are some pros and cons of having too much or too little tax withheld from your pay.

Too much tax withheld from pay

Pros:

  • It’s an enforced savings plan. It’s easy to accumulate a large sum of money, relatively painlessly, by having it withheld from your pay.
  • It’s exciting. Many people say they look forward to their tax refund all year.
  • You don’t have to worry about owing tax. By having way too much tax withheld, at least you never have to face a tax bill when you file.

Cons:

  • Overwithheld taxes do not pay interest income. With today’s higher savings rates, you are especially losing out by essentially lending money at 0% to the IRS.
  • You’re paying high interest elsewhere. If you pay 18% on a credit card balance while the IRS holds your excess withholding for free, you’re losing money every month.
  • You have smarter ways to avoid a big tax bill. By estimating your tax liability throughout the year, you can make adjustments to avoid unpleasant surprises without having too much tax withheld.
  • You also have smarter ways to save money automatically. One way is to have money transferred automatically into a savings or retirement account directly from your paycheck. Another relatively painless savings method is to have regular automatic transfers from your checking account to a savings account.

Too little tax withheld from pay

Pros:

  • You want to hold your money as long as possible. You may want to keep your money longer. For example, if you are earning a higher return elsewhere or if you need to carefully plan your cash flow.
  • You may be able to avoid penalties and interest. If you owe less than $1,000 when you file your tax return, you generally do not owe penalties and interest on the amount you owe. You may qualify for other exceptions to the penalty for underpayment of taxes.

Cons:

  • You could owe taxes and penalties when you file. By estimating your tax refund throughout the year, you can make sure you have enough income tax withheld to match the amount you owe as closely as possible.
Sally Herigstad
Sally Herigstad, Business Operations Insider and Senior Writer
Sally Herigstad, an authority on all things finance and taxation, is the author of Help! I Can't Pay My Bills: Surviving a Financial Crisis. As a certified public account, a member of AICPA and a tax software developer, Herigstad has spent decades guiding business owners and others through complex tax laws, debt resolution, financial planning and more. Over the course of her career, Herigstad has served as a subject matter expert for Microsoft's TaxSaver, MSN Money and Microsft Money, and contributed insights and teachings through LendingTree, The Motley Fool, Bankrate, U.S. News & World Report, CreditCards.com, TaxAct and Realtor.com. For CreditCards.com, she spent 10 years helming the "To Her Credit" column, in which she answered reader questions on an assortment of financial matters.
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