Life Changes? TurboTax Has You Covered.

Getting a raise, starting a new job, or retiring can have a dramatic impact on your taxes. TurboTax Deluxe walks you through job changes, step by step, to ensure your return is correct and you get every deduction you deserve.

Your Raise (or Pay Cut)

Will my raise or pay cut change my tax rate?

Maybe. Any change in your income—big or small—will affect the amount of taxes you pay. But it won’t necessarily affect your tax rate—the percentage of income you pay in taxes. It all depends on how big of change there is.

To find out if your tax will rate will change, compare your last year’s tax bracket to this year’s. Your tax bracket is the rate at which your last dollar of income is taxed. It’s higher than your actual tax rate. But it will give you a good idea of how much of your income will go to Uncle Sam.

With TurboTax Deluxe, you don’t have to worry about tax rate changes. It puts you in the right tax bracket—automatically.

Should I adjust my paycheck withholding?

As your salary goes up or down, the IRS changes your paycheck withholding to reflect it. You don’t have to do a thing.

However, if your raise pushes you into a higher tax bracket, adjusting your withholding may help you keep more of your hard-earned cash in your pocket.

TurboTax Deluxe calculates next year’s withholding allowances, makes recommendations for adjusting your withholding, and prints out Form W-4 for you.

How do I adjust my withholding?

Your First Job

What is withholding?

Withholding is the amount held back from each paycheck to pay your income and Social Security taxes for the year. Withholding keeps you from having to pay your taxes all at once when you file your return.

When you start your job, you’ll be asked to fill out a Form W-4 (PDF). This will determine how much will be taken out of each of your paychecks for taxes. The amount is based upon your salary and the number of allowances you claim on the W-4. In most cases, it’s best to claim every allowance you’re eligible for.

But remember: The more allowances you take, the more likely you’ll owe at tax time, and vice versa.

TurboTax Deluxe lets you try different withholding scenarios so you can see which is best for you.

How do I adjust my withholding?

Can I deduct my job-hunting expenses?

Unfortunately, expenses incurred while looking for your first job are not deductible. But moving expenses to get to that first job are.

If you moved more than 50 miles, you can deduct expenses for:

• Packing supplies
• Truck rental
• Movers
• Storage
• Mileage and gas
• Airfare
• Hotel stays

You can also deduct 27 cents per mile (plus parking fees and tolls) if you drive your own car to the new destination. Be sure to keep the receipts for these expenses and a written record of your mileage. You’ll need them at tax time.

TurboTax Deluxe walks you through all the job-related moving expenses you can deduct, then tells you if you qualify. So you get every deduction you deserve.

Learn more ways to save on your taxes

What other job-related expenses can I deduct?

If your employer requires you to wear special clothing to work, such as a uniform, you may be able to deduct the cost and upkeep (dry cleaning, for example) of your work clothes.

You can also deduct the cost of protective clothing and safety items required for your work, such as hard hats and work gloves.

TurboTax Deluxe walks you through over 350 deductions, including job-related deductions, so you don’t miss a single opportunity to save.

Do I have to report tips to my employer?

Sorry, Uncle Sam considers tips part of your income. You must report them so your employer can withhold federal income, Social Security and Medicare taxes from your total wages. If you don’t report your tips, you could end up paying a hefty penalty in addition to the taxes you owe.

Keeping a daily record of your tips is a good idea. That way, you can accurately report your tips to your employer and on your tax return. Plus, you’ll be able to prove your tip income if your return is ever audited.

What else do I need to know about reporting tip income?

Should I join my company’s 401(k) plan?

Definitely. A 401(k) plan is a great way to start saving for retirement and can even reduce your taxes.

Most companies will match part of your contribution—for example, 50 cents on the dollar for the first 3% of the money you contribute. You should try to contribute at least enough to get the full benefit of your company’s matching policy.

With traditional 401(k) plans, your contributions are taken from your pretax salary, so they can actually reduce the amount you’ll pay in taxes. For example, if you make $50,000 a year and you contribute $10,000 to your 401(k) plan, your taxable income will be reduced to $40,000.

Plus, depending on your income, your 401(k) contributions may also earn you a special tax credit.

TurboTax Premier shows you how to take full advantage of the retirement and tax-saving benefits of contributing to a company 401(k).

Learn more about 401(k) plans.

Your New Job

How much should I have withheld from my paychecks?

That depends. The information you provide on Form W-4 (PDF) determines how much your employer takes out of your paychecks for taxes. You can take allowances for yourself, your spouse and your kids (just to name a few), but you aren’t required to do so.

Allowances can be a double-edged sword. The more you take, the bigger your paycheck will be. But, you’ll be more likely to owe at tax time, and vice versa. Uncle Sam suggests you claim every allowance you’re entitled to. The trick is to match your withholding to the taxes you owe.

TurboTax Deluxe calculates next year’s withholding allowances and prints out Form W-4 for you.

How do I adjust my withholding?

Can I deduct for my job-hunting expenses?

Yes. You can deduct a variety of job-hunting costs including:

• Résumé paper and printing
• Stamps
• Portfolio supplies
• Phone calls
• Employment agency fees

In some cases, you can also deduct moving expenses. Be sure to keep your receipts for the following expenses:

• Packing supplies
• Truck rentals
• Movers
• Storage
• Mileage and gas
• Airfare
• Hotel stays

But keep in mind, job-hunting costs are considered miscellaneous expenses. So they must exceed 2% of your adjusted gross income to be deductible.

TurboTax Deluxe walks you through all the job-hunting expenses you can deduct, then tells you if you qualify. So you get every job-hunting deduction you’re entitled to.

Will I be taxed on my 401(k) and IRA earnings?

Not if you don’t take any money out of your 401(k) or IRA account.

Earnings from a 401(k) or IRA plan are tax-deferred. That means you don’t have to pay a dime in taxes until you make a withdrawal (also known as “receiving a distribution”). Withdrawals are then taxed as ordinary income.

In addition to handling 401(k) and IRA earnings, TurboTax Premier includes tips for increasing your retirement plan contributions without decreasing your take home pay.

Will I be taxed for rolling over my 401(k)?

Not if you use direct transfer to move the funds from your previous 401(k) plan to another 401(k) or IRA.

However, if you received a check made out to you for your 401(k), your employer, by law, will have to keep 20% for taxes. You’ll also have to report your rollover to the IRS.

Here’s the good news: If you deposit the check into another 401(k) or IRA account within 60 days, you’ll get all 20% back at tax time, unless your regular withholding doesn’t cover the taxes you owe.

What is direct transfer?

Will I be taxed on my severance package?

Yes. The IRS considers your severance (or separation) package income, and will tax it as such. The same is true for payments from your old employer for any accumulated vacation or sick time.

Whether you receive one big check or regular payments, your previous employer will withhold taxes just like they did from your regular paychecks.

Be sure to watch for your final W-2 form from your previous employer. The company isn’t required to send it to you right away, but must provide it by January 31 of the year after you leave the company.

TurboTax Deluxe can automatically download W-2s from many employers, saving you time and keystrokes.

Your Retirement

Will I be taxed on my Social Security benefits?

Maybe. Some people have to pay taxes on up to 85% of their Social Security benefits. Others pay no taxes at all on their benefits. It depends on how much income you receive from other sources. The more income you receive, the more you’ll owe at tax time.

However, there are two ways to avoid this potential trap. You can ask the Social Security Administration to withhold taxes from your benefits by filing a W-4 voluntary withholding form. Or you can pay quarterly estimated taxes. Either is a smart choice. And both will reduce the amount you owe at tax time.

TurboTax Deluxe shows you how to enter your Social Security income and will give you extra help with any supplemental income. We do the math so it’s 100% accurate—guaranteed.

How can I get my full Social Security benefits?

Have questions about your 401(k) or IRA? Visit Your Investments.

Working for yourself can be tremendously rewarding. But chances are, you’re going to have a lot of questions at tax time. That’s where we can help.

Whether you’re a freelancer, contractor, consultant, or sole proprietor; work full-time, part-time or out of your home, TurboTax Home & Business guides you step by step to get your biggest business deduction. And if you own a corporation, partnership, or multiple-owner LLC, TurboTax Business makes it easier to get every business write-off you deserve, including commonly overlooked deductions specific to your industry.

Self-Employment Taxes

Do I have to file my business and personal taxes separately?

No. Uncle Sam lets you file them together. You don’t even have to distinguish between profit and income.

TurboTax Home & Business includes everything you need to file both your personal and business taxes in one easy-to-use solution.

How will the self-employment tax affect me?

You’ll owe 15.3% on the first $106,800 you make (from your self-employment). That’s probably more than you expected. But there is a reason. Employers and employees share the cost of paying for Social Security and Medicare, with each paying 7.65%. When you’re self-employed, you have to cover the full 15.3% yourself.

Here’s the good news: When figuring the self-employment tax you owe, you get to reduce self-employment income by 7.65% before applying the tax rate. Plus, you can claim 50% of what you pay in self-employment tax as an income tax deduction.

TurboTax Home & Business handles all self-employment tax calculations for you and helps you deduct your self-employment taxes, so you get your biggest refund—guaranteed.

Learn more about the self-employment tax.

Get more tax tips for the self-employed.

Do I need to pay estimated taxes?

It depends on your situation. If you expect to owe less than $1,000 in taxes on your self-employment income, you don’t have to pay estimated taxes. You can simply wait until April and pay all of your taxes then.

But if you expect to owe more than $1,000, the IRS requires you to pay estimated taxes four times a year. Failing to do so (or missing a deadline) could earn you a hefty penalty.

If you have a job in addition to your self-employment, consider increasing your withholding. That way you’ll avoid writing a painfully large check to the government at the end of the year.

TurboTax Home & Business will help you decide if you should make estimated tax payments and will even calculate your payments.

Learn more about estimated taxes

Get more tax tips for the self-employed.

Deducting Your Expenses

What business expenses can I deduct?

To be deductible, the IRS requires that a business expense be both ordinary (common and accepted in your industry) and necessary (helpful and appropriate for your business). There’s a long list of business expenses you may be able to deduct. They include:

• Accounting fees
• Advertising
• Bad debt
• Contract labor
• Domain names and web site hosting
• Employee benefit programs
• Insurance
• Office equipment and furniture
• Salaries, wages, and other compensation
• Software
• Supplies, such as printers, staplers, and coffee beans
• Travel
• Utilities
• Vehicles

There are also business expenses that are only partially deductible, including:

• Home office expenses
• Expenses for vehicles used for business (determined by the percentage of personal use vs. business use)
• Costs to feed and entertain clients
• Gifts (up to $25 per person)

If you're a sole proprietor, consultant, contractor, or single-owner LLC, TurboTax Home & Business will help you get all the business deductions you deserve, including those unique to your industry.

If you're incorporated, have a partnership or multi-owner LLC, TurboTax Business will help you find write-offs across 60 industries, including commonly overlooked deductions

Learn more about business tax deductions.

What documents should I save?

If you’re planning to deduct expenses, be sure to keep careful records and receipts. You’ll need them to prove your expenses. Examples of documents you should save include:

• Paid invoices, canceled checks
• Bank statements and deposit slips
• Credit card statements
• Cash register tapes, petty cash vouchers
• Check register(s) for the tax year
• Summary of transactions totaled each day, or week
• Monthly income summary (money in)
• Monthly disbursements summary (money out)
• Any calendars, diaries, day planners, logs that justify expenses
• Employee payroll records (if any)
• Copies of filed tax returns (income, employment, property)

Learn more record-keeping tips to lower your taxes.

Can I deduct home office expenses?

Let’s find out. You must use your home office “exclusively and regularly” to deduct it. What does that mean? First, you can’t use your office to watch TV or even pay personal bills. Second, you must use it as your primary place of business or to frequently meet with clients.

If your office passes those tests, you can deduct part of your mortgage interest, property taxes, insurance, and utility bills—just to name a few. Usually this is based on how many square feet you use for business and how many square feet are reserved for personal use.

If you're a sole proprietor, consultant, contractor, or single-owner LLC, TurboTax Home & Business will help you determine if you qualify to deduct home office expenses and calculates your home office deduction for you.

If you're incorporated, have a partnership or multi-owner LLC, TurboTax Business will guide you through deducting your business expenses, including home office expenses.

Get more tax tips for people who work at home.

Standard mileage rate or actual expenses: which is better for vehicle deductions?

It depends. If you do a lot of driving, then the standard mileage rate (55 cents per mile for 2009) method may work better for you.

If you do not do a lot of driving, or if your vehicle gets low gas mileage, you may be better off deducting your actual expenses for items such as gas, oil changes, tires, repairs, preventative maintenance, insurance and registration. But, you must keep a log of your trips noting the date, the miles driven, and the purpose of each trip.

One more thing to consider: If you choose actual expenses in the year you start using your car for business, you can’t switch to the standard mileage rate later. If you choose the standard mileage method first, you can switch to actual expenses in a later year.

If you're a sole-proprietor, consultant, contractor, or single-owner LLC, TurboTax Home & Business will automatically determine which deduction method will get you the biggest tax savings.

If you're incorporated, have a partnership or multi-owner LLC, TurboTax Business will show which method will get you the largest deduction

Learn more about business vehicle deductions.

Your Employees and Contractors

How do I prepare forms for employees and contractors?

If you used contractors during the year, you’ll need to send them Form 1099-MISC. The same goes for any businesses (other than corporations) that provided services (not goods) to your business. That includes the company you rent your office from and the electrician who wired it up, but not the store that sold the electrical equipment.

Then there’s the W-2. This form serves the same purpose for your employees. It simply reports how much you paid them and should be easily found in your expense records.

The important thing to remember is that both forms need to be prepared and mailed to workers by January 31. You have until February 29 to get them to the IRS or you’ll be hit with a penalty.

If you're a sole-proprietor, consultant, contractor, or single-owner LLC, TurboTax Home & Business will help you prepare and file unlimited W-2 and 1099-MISC forms. We do the math, so it’s 100% accurate—guaranteed.

If you're incorporated, have a partnership or multi-owner LLC, TurboTax Business lets you easily prepare W-2 and 1099 forms for all of your partners, employees and contractors.

Homeownership offers a lot of advantages, especially when it comes to taxes. Whether you bought, sold or refinanced, TurboTax Deluxe will make sure you’re not missing out on important home-related tax deductions.

Your New Home

How do I qualify for the mortgage interest deduction?

It’s pretty simple. If you’re the primary borrower and you make the loan payments, you qualify. All you need to take the deduction is your mortgage statements.

What counts as deductible mortgage interest?

Any interest you pay on a loan that’s secured by your main home or a second home is deductible, including:

• A mortgage to buy your home
• A second mortgage
• A line of credit
• A home equity loan
• A home improvement loan

TurboTax Deluxe walks you through home-related deductions (including many commonly overlooked deductions) so you don’t miss any tax-saving opportunities.

Learn more about deducting mortgage interest

Are there any other deductions for homeowners?

You bet. In addition to mortgage interest, you can also deduct:

• Property taxes
• PMI payments
• Purchase points
• Home improvements for medical reasons
• Mortgage interest on a second home

TurboTax Deluxe covers all of these deductions (and more) and tells you how to qualify for them.

Learn more about deductions for homeowners.

Should I itemize my deductions?

Here’s an easy way to decide if you should itemize: Compare your yearly mortgage interest to your standard deduction. If your mortgage interest is higher, you should itemize.

If you do itemize, you can also deduct:

• Donations to charity
• Non-reimbursed medical bills
• Personal property taxes
• Car registration fees
• Real estate taxes
• Job search expenses, such as travel, paper, and printing costs

Learn more about itemizing

TurboTax Deluxe automatically uses the deduction method—standard or itemized—that’s best for your situation.

What about the first-time homebuyer's credit?

If you bought your first home between January 1 and November 30, 2009, you can qualify for a tax credit worth up to $8,000. Because a tax credit reduces your tax bill dollar-for-dollar, this new break can put $8,000 in your pocket to help pay for your new digs.

For example, if you would otherwise get a $2,400 tax refund for 2009, qualifying to claim this new credit would boost your refund to $10,400.

Sold Your Home

Will I be taxed on my profit?

Chances are, you won’t have to pay dime. With the home-sale exclusion most or all of your profit may be tax-free if during the 5-year period ending on the date of the sale you:

1. Owned the home for at least 2 years.
2. Lived in the home as your main residence for 2 years.
3. Didn’t sell any other homes in the previous 2 years.

If you qualify, the actual amount of profit you can exclude depends on your filing status. For single filers, you can take up to $250,000 tax-free. Married couples who file jointly can look forward to a $500,000 exclusion. Non-married couples who own a home jointly (and file separately) can each take up to $250,000. Anything over that is fair game for the IRS.

TurboTax Deluxe offers in-depth help for handling profits from home sales.

Do I have to report my sale?

It depends.

If you qualify for the home-sale exclusion and your profit is less than the $250,000/$500,000 limit, you don’t need to report the sale, unless you receive a Form 1099-S.

If you receive a Form 1099-S, you’ll have to report the sale, even if your gain is tax-free. To avoid this, ask the closing agent not to file a Form-1099-S.

If you do not qualify for the home-sale exclusion or if your profit exceeds the $250,000/$500,000 limit, you must report the sale and pay taxes on the profit.

TurboTax Deluxe automatically determines if you need to report your home sale, and does all tax calculations for you.

Learn more about reporting the sale of your home

Can I deduct a loss from the sale of my home?

Unfortunately, no. The IRS considers a loss from a home sale a “personal loss”. But you may be able to make up for part of your loss by claiming commonly overlooked deductions, including:

• State sales taxes you paid (according to the IRS tax tables)
• Charitable donations
  
• Refinancing points
• Childcare credit
• Work-related moving expenses
• Student loan interest

TurboTax Deluxe walks you through over 350 deductions (including commonly overlooked deductions) to help you keep more of your hard-earned pay.

View more commonly overlooked deductions.

Can I deduct expenses for home improvements?

No. But home improvements can help reduce or even eliminate the taxes you’ll pay on the profit from the sale of your home.

Here’s how it works: Home improvements add to your home’s value, or as it’s known in tax talk, its basis. When you sell, the cost of the improvements is added to the original purchase price of your home to determine its basis for tax purposes. The basis is subtracted from the sale price to come up with your taxable profit. In this way, home improvements lower your taxable profit and therefore the taxes you pay on the sale.

But only improvements, not repairs, qualify. Repairs are fixes, such as painting, wallpapering, fixing minor leaks, repairing broken windows, and so on.

Improvements add value to your home, make it last longer, or give it new uses. There’s no list of qualifying improvements, but common ones include:

• Swimming pools
• Central air
• Water heaters
• Security systems
• Storm windows

Be sure to keep your receipts for home improvements. You’ll need them at tax time.

TurboTax Deluxe can reduce your taxes by helping you get the full tax benefits of your home improvements.

Learn more about home improvements and taxes.

Refinancing Your Mortgage

Should I refinance?

As rule of thumb, you should only consider refinancing to a rate that’s at least 1.5 to 2% lower than your current interest rate.

If you’re thinking of refinancing, first get a quote. Then take your refinanced interest rate and add .25% for every point you’ll pay to get your loan. For example, if you’re currently paying a 7.5% interest rate, and you’re considering refinancing to 5.5% with 2 points, you’d be looking at about 6% interest. In this example, you’d be better off refinancing.

But remember: a lower mortgage interest rate will mean a lower mortgage interest deduction at tax time.

Use our free calculator to compare interest rates and see how refinancing will affect your taxes

How do I deduct refinancing points?

Slowly. Unlike your original purchase points, you have to deduct refinancing points over the life of your loan.

For example: If you paid $2,000 worth of refinancing points on a 30-year loan, you can expect about a $67 deduction for all 30 years. ($2,000 / 30=$66.67)

TurboTax Deluxe automatically remembers your refinancing point deduction from year to year. Then reminds you to claim it every year for the life of your loan.

Children truly are a gift… especially when it comes to your taxes. Whether you’ve just had a baby or adopted, you’re likely to qualify for big deductions and credits at tax time every year, long into their college years. TurboTax Deluxe will help you take full advantage of the tax breaks available to you as a parent.

Have a New Baby

Can I claim my baby as a dependent?

If your bundle of joy lives with you and does not provide more than half of his/her own support, you can claim him/her as your dependent.

TurboTax Deluxe helps you determine if your child is a dependent. Then it walks you through all the deductions and exemptions you qualify for.

Do I qualify for the dependency exemption?

If your baby is a U.S. citizen (or a resident of Mexico or Canada) and lives with you, you qualify. If you file as head of household, you can receive an exemption of $3,650 for each qualifying child. That’s an $913 savings per child for parents in the 25% tax bracket.

TurboTax Deluxe will determine if you qualify for the dependency exemption.

Are there any other deductions for my baby?

Even better, there are credits. What’s the difference?

A tax deduction is an expense or an amount of money that lowers your taxable income

A tax credit is dollar-for-dollar reduction that is subtracted from your tax liability. For instance, if you qualify for a $100 tax credit, that amount is subtracted directly from the amount of tax you owe.

Here are some common credits your child may qualify you for:

• Child Tax Credit—You’re automatically qualified to receive a $1,000 credit for each child under age 17 you claim as a dependent on your return. Keep in mind that this credit phases out for higher income earners.
• Earned Income Credit—If your child qualifies and your income is under $35,463 ($40,463 married filing jointly), you may qualify for up to a $3,043 credit. The income limits and credit amount go up if you have more qualifying children (up to three children).
• Child Care Credit—If you pay for child care so you can work, you can earn a credit of $600 to $1,050 depending upon your child care expenses.

TurboTax Deluxe walks you through all child-related credits to ensure you don’t miss out on any tax-saving benefits.

How else will my child affect my taxes?

Learn more about the Child Tax Credit

Learn more about the Earned Income Credit

Learn more about the Child Care Credit

Should I change my filing status?

If you’re married, you’re already enjoying the lowest tax rates. Don’t change a thing.

If you’re a single parent, consider filing as head of household. If you qualify, it will give you a bigger standard deduction and you’ll pay less taxes overall. To qualify, you must pay more than half the cost of providing a home for your child.

If you’re divorced and the child stays with you for more nights during the calendar year, you can claim the child on your tax return and should file as head of household. If not, you cannot claim the child on your return and should file single.

Quick Tip: In addition to cutting your tax bill, claiming your child as a dependent also allows you to cut back on your paycheck withholding. You should file a new W-4 form with your employer to claim an additional withholding allowance.

How do I adjust my withholding?

TurboTax Deluxe automatically determines the filing status that will get you the biggest refund.

Adopted a Child

Can I claim my adopted child a dependent?

Yes. As long as your child lives with you and is a U.S. citizen (or resident of Mexico or Canada), Uncle Sam treats him/her just like a biological child. You can deduct $3,650 for the dependency exemption, and you’re still in the running for all the child-related credits covered above.

Are there any special deductions or credits for adopted children?

There are no special deductions, but there is a tax credit of up to $12,150 to help offset adoption costs. And, if you adopt a “special needs” child, you can claim the full credit even if you spend less than $12,150.

TurboTax Deluxe helps you take full advantage of child-related deductions and credits.

Learn more about deductions and credits related to an adopted child

Sent a Kid to College

Can I still claim my college-bound child as a dependent?

Maybe. If your child is a full-time student, you can claim him/her as a dependent until the age of 24, unless your child takes a personal exemption on his/her own tax return.

If your child is a part-time student, you can only claim him/her as a dependent until age 19.

Learn more about how sending a child to college will impact your taxes

Can I take the American Opportunity Tax Credit or Lifetime Learning Credit?

Cross your fingers. Both credits depend on your income.

You can claim an American Opportunity Tax Credit of up to $2,500 for tuition paid for the first four years of college. To qualify, your income must be less than $180,000 combined for couples filing jointly, or less than $90,000 for individuals.

The Lifetime Learning Credit can be as much as $2,000, depending on your post-high school education expenses, and if your income is under $60,000 ($120,000 if filing jointly).

There’s just one catch: You can’t claim both credits in the same year for the same child.

TurboTax Deluxe automatically determines which credit will get you the biggest tax savings.

Learn more about deductions for higher education expenses.

Are there any other deductions for higher education expenses?

Yes. You can take a tuition deduction of up to $4,000 depending on your tuition costs and income. But only tuition or fees to enroll in or attend an accredited institution above the high-school level qualify. Expenses such as room and board, books, activity fees, and supplies do not qualify.

This one has a catch, too: You can’t take the deduction in the same year you take a American Opportunity Tax Credit or Lifetime Learning Credit.

Quick Tip: Before using this deduction, check out the American Opportunity and Lifetime Learning credits. They have stricter income limits to qualify, but are more valuable because they reduce your taxes dollar-for-dollar, instead of just reducing the amount of income subject to tax. In most cases, you should only claim the tuition deduction if your income is too high to qualify for these credits.

TurboTax Deluxe calculates which will save you more, a credit or a deduction, so you get the biggest tax break possible.

Learn more about deductions for higher education expenses.

Buy? Sell? Rollover? Reinvest? Whatever you do, TurboTax Premier makes it easy to report your investments, including from rental property. Plus, it helps you find and take advantage of deductions that can lower your tax bill or increase your refund.

Your Retirement: 401(k)s and IRAs

How will I be taxed on my 401(k) and IRA dividends?

You won’t. That’s the great thing about retirement plans. Your dividends are tax-deferred. So you don’t have to pay a dime in taxes to Uncle Sam until you cash out (also known as “receiving a distribution”).

TurboTax Premier can help you increase your retirement plan contributions without decreasing your take home pay.

I cashed out a Roth 401(k) or Roth IRA. Will I be taxed?

Nope. You paid taxes before you contributed, so you don’t have to share with the IRS when you cash out.

Get more tax tips for retirees

I cashed out my 401(k). How will I be taxed?

Payments from your 401(k) are taxed at your regular income tax rate—anywhere from 10 to 35%.

How much is withheld for taxes depends on how you’re paid. If you receive regular payments—say monthly or quarterly—the IRS doesn’t withhold any money for taxes. However, if you take a big chunk of money at once, they’ll withhold 20%. But don’t worry. If you owe less, you’ll get a refund in April. To avoid this, you can ask your employer to withhold money from your payouts, or make estimated tax payments.

One more thing to remember: If you’re under 55½ when you cash out your 401(k), you’ll also pay a 10% penalty. Unfortunately, you’ll never see or benefit from this money again.

TurboTax Premier walks you through reporting 401(k) withdrawals and automatically calculates your tax liability for you.

I cashed out my IRA. How will it be taxed?

IRAs are a lot like 401(k)s. Your withdrawals are taxed at your regular income tax rate, from 10 to 35%. And you’ll have to pay the 10% penalty if you cash out before age 55½.

The big difference is that no matter how much or when you withdraw from your IRA, the IRS does not withhold any money for taxes. So you may want to pay estimated taxes or fill out Form W-4P and have federal income taxes withheld to avoid writing a painfully large check in April.

TurboTax Premier helps you qualify for IRA deductions that reduce your taxable income and boost your refund.

Your Stocks

I bought stock. How will I be taxed on it?

Until you receive dividends or sell your investments, you not only don’t have to pay taxes on your stock purchase, you don’t even have to report your purchase to the IRS. Your taxes will be as easy as always.

Tax-saving tip: Any account management, maintenance and investment advisory fees you pay to a broker or investment firm are deductible as a miscellaneous itemized deduction.

TurboTax Premier will help you take advantage of this and over 350 other deductions to lower your tax bill and increase your refund.

How will I be taxed on my stock dividends?

That depends on what type of dividends you receive—ordinary (from non-qualified stocks) or qualified. Chances are, you have the first.

Ordinary dividends are taxed at your regular income tax rate, anywhere from 10 to 35%. You simply include them as income on your return.

Qualified dividends get special treatment. They’re taxed at the lower capital gains rate, from 0 to 15% depending on your income.

TurboTax Premier takes you step-by-step through reporting stock dividends and determines at which rate they’ll be taxed.

I sold stocks. How will I be taxed on them?

First, subtract your purchase price from your selling price. That’s your profit or loss.

Profits can be taxed in one of two ways. If you owned your stock for more than a year, your profit is considered a long-term capital gain. If you’re in the 10% or 15% income tax brackets, you’ll be taxed at up to 5%. If you’re in a higher tax bracket, you’ll be taxed at up to 15%.

If you owned your stock for less than a year, your profit is considered a short-term capital gain and is taxed at your regular tax rate of 10 to 35%.

If you sold for a loss, you can use that loss to offset gains on other investments to lower you tax liability. Or you can deduct $3,000 a year until you’ve written off every penny.

TurboTax Premier offers added guidance for reporting stock sales and automatically determines how much tax you’ll pay. It even keeps track of capital gains and losses that carry over to future tax returns—year after year.

What if I received my stock as a gift or inheritance?

Learn more about capital gains

Your Bonds

I bought bonds. How will I be taxed on them?

You won’t be taxed until your bonds earn interest or you sell them.

How will I be taxed on my bond interest?

That depends on the type of bond. If you’re the lucky owner of municipal bonds, you won’t be taxed on any interest.

With corporate bonds, you’ll pay your regular income tax rate, from 10 to 35%, on your interest.

Government bonds are usually taxed the same way, but they have perks. You’ll never have to pay state or local taxes on their interest. Plus, you can avoid federal taxes simply by using your government bonds to pay for college.

TurboTax Premier helps you report bond interest and automatically determines how much tax you’ll pay.

I sold or redeemed bonds. How will I be taxed on them?

Subtract your purchase price from your selling price. That’s your profit or loss.

The IRS taxes bond profits differently depending on how long you owned the bond.

If you owned the bond for more than a year, your profit is a long-term capital gain and is taxed at rates from zero to 15%, depending on your income.

If you sold your bond in a year or less, your profit is a short-term capital gain and is taxed at your regular tax rate of 10 to 35%.

Even if you sold for a loss, there’s good news. Your loss will offset gains on other investments and help lower your taxes. Or you can deduct $3,000 a year until you’ve written off the whole loss.

TurboTax Premier automatically determines your capital gains and losses and tracks those that carry over to future tax returns—year after year.

What if I received my bond as a gift or inheritance?

Your Mutual Funds

How will I be taxed on my mutual fund dividends?

Even if you reinvest, your mutual fund dividends are treated like cash: taxable.

Now here’s where things get a little confusing. Some dividends are considered long-term capital gains. That means they could be taxed anywhere from zero to 15%, depending on your total income.

Other dividends are considered short-term capital gains. The IRS taxes them at your regular income tax rate—anywhere from 10 to 35%.

Still others are “tax-exempt” because they’re mainly composed of municipal bonds. Don’t let that term fool you, though. You still have to report these dividends and possibly pay taxes on them.

TurboTax Premier eliminates the confusion by helping you determine how your dividends will be taxed—as capital gains, regular income, or not at all.

How will I be taxed on my mutual fund distributions?

With mutual funds, your portfolio manager is in charge of selling shares. You can only sell your mutual fund as a whole. So every time you receive a distribution, it means your portfolio manager sold shares.

To determine how much you’ll be taxed, you must first determine your profit or loss by subtracting the purchase price of your shares from the selling price.

Profits from shares you owned for more than a year, are long-term capital gains that are taxed at zero to 15%, depending on your income. Profits from shares you owned for less than a year are short-term capital gains and will be taxed at your regular income tax rate, from 10 to 35%.

If you sold for a loss, you can use that loss to offset gains on other investments. If you don’t have other investments, you get to deduct $3,000 a year until you’ve written off the entire loss.

TurboTax Premier automatically determines how your mutual fund distributions will be taxed. Plus, it calculates your capital gains and losses and tracks those that carry over to future tax returns.

What if I received my mutual fund as a gift or inheritance?

Your Rental Property

Will I be taxed on my rental income?

Yes. The good news? You can reduce your rental income (and thereby reduce your taxes) by deducting the expenses you incur to get your property ready to rent and maintain.

What expenses can I deduct?

In general, you can deduct any expenses you incur to place the property in service, manage it and maintain it. Typical deductible expenses include:

• Advertising
• Cleaning and maintenance
• Commissions
• Depreciation
• Homeowner’s associations dues and condo fees
• Insurance premiums
• Local property taxes
• Management fees
• Pest control
• Professional fees
• Supplies
• Trash removal fees
• Utilities

Be sure to keep all receipts, checks, and bank statements. You must be able to document your expenses to get the write-off

TurboTax Premier will tell you which expenses qualify as deductions and help make sure you get every penny you deserve.

Learn more about deducting rental property expenses

Can I Deduct Improvements and Repairs?

Yes. But there’s a big difference in how you can deduct each.

Improvements add to the value of the property or substantially prolong its life and must be depreciated over their useful lives (which are defined by the IRS). Common improvements include:

• Additions to the structure
• Adding a swimming pool
• Installing a water filtration system
• Modernizing a kitchen
• Installing insulation

Repairs keep the property in good operating condition. They can be deducted in the year you pay for them. Typical repairs include:

• Minor repainting
• Repairing appliances
• Fixing leaks
• Replacing broken windows or doors

TurboTax Premier will tell you which expenses qualify as immediate deductions and which must be depreciated. It also guides you through calculating and reporting depreciation and automatically determines which depreciation method is best for you.

How do I calculate depreciation?

Have questions about 401(k) rollovers or Social Security benefits? Visit Your Career.

Getting married, divorced or losing your spouse has a tremendous impact on your taxes. TurboTax Deluxe helps ease the transition by walking you through the changes in your tax situation and explaining how to deal with them.

Newly Married

Should my new spouse and I file jointly or separately?

All married couples have the option to file jointly or separately.
In most cases, you’ll pay lower taxes by filing a joint return unless you or your spouse have massive medical expenses or items such as casualty losses to deduct.

One other thing to keep in mind: Filing separately disqualifies you for some major credits and deductions, including:

• Earned Income Credit
• Child and Dependent Care deductions
• American Opportunity and Lifetime Learning credits
• Student loan interest deduction

TurboTax Deluxe lets you try your return both ways—filing jointly and separately—so you can decide which filing status is best for you.

Get more tax-saving tips for newly married couples.

Should I change my paycheck withholding?

Anytime you have a major life change, you should review your W-4 form (PDF). When you get married, you can take an additional allowance on your W-4, and keep more money in your pocket during the year.

How do I adjust my withholding?

Newly Divorced

Does the IRS still consider me married?

No. If your divorce was final before December 31, you’re single in Uncle Sam’s eyes.

Filing “single” isn’t your only option though. If you have kids that live with you, consider filing as head of household. It could reduce your taxes and get you a bigger refund.

Should I file single or as head of household?

If you can, file as head of household. You’ll benefit from a higher standard deduction—$8,350—and lower tax rates.

To qualify you must pay half the cost of keeping up a home where you lived with your unmarried child, grandchild, stepchild, adopted child, foster child, dependent married child or any other dependent family member.

You also qualify if you paid half the cost of housing your parent (under your roof or not) and can claim him or her as your dependent.

TurboTax Deluxe helps you decide which filing status will get you the biggest refund.

Get more tax tips for the newly divorced.

Who gets to claim the kids?

The custodial parent. It all comes down to time. Whoever the kids lived with longer during the year gets to claim them and a $3,650 exemption per child.

The parent who claims the dependent exemption also has the right to claim the Child Credit or a American Opportunity or Lifetime Learning credit.

TurboTax Deluxe helps you take full advantage of the tax-saving benefits available to you as custodial parent.

What if my ex doesn’t play by the rules?

How does alimony affect my taxes?

It can be a deduction or taxable income, depending on whether you’re the one paying alimony or the one receiving it. In this case, it’s better to give than receive.

If you’re paying alimony, you can deduct the payments on your return—even if you don’t itemize—as long as the payments are in cash and spelled out in the divorce decree.

If you’re receiving alimony, you have to report it as income and pay taxes on it. It’s Uncle Sam’s way of evening the playing field.

Use our free TaxCaster calculator to see how alimony payments will affect your taxes.

How about child support?

This is an easy one. Child support has no affect on your taxes (or your ex’s). It doesn’t count as income. It’s not deductible.

Should I change my paycheck withholding?

Any time you have a major life change, you should review your Form W-4. When you get married, you get to take an additional allowance on that form. After a divorce, you’ll want to give that allowance back so you don’t owe in April.

Not sure how many allowances you’re currently taking? Ask your boss or HR person for your previous W-4. If it needs updating, fill out a new one.

How do I adjust my withholding?

Spouse Passed Away

Do I qualify to file as a widow(er)?

First of all, you can file jointly for the tax year in which your spouse died. For the two subsequent years, you can continue to file jointly as a qualifying widower (and take advantage of the lower tax rate), if:

1. You were entitled to file jointly in the year your spouse died.
2. You do not remarry.
3. A dependent child or stepchild lives in your home during each year.
4. You pay more than half the cost of keeping up your home.

TurboTax Deluxe helps you determine if you qualify to file as a widow(er). It can also make it easier to file your spouse’s final return.

How do I file my spouse’s final return?