THE FOREIGN SERVICE JOURNAL | JANUARY-FEBRUARY 2024 49 2024 Form W-4 Withholding Certificate Taxpayers usually do not think to revise their Form W-4 withholdings until April or until they have paid their final 2023 taxes. Delaying a Form W-4 update may result in taxpayers withholding taxes on their wages based on an old calculation for several months of 2024. Don’t wait. AFSA recommends readers revise their Form W-4 via their human resources office or through their employer’s online portal (e.g., Employee Express for State Department employees) as soon as possible. Promptly doing so will help you avoid over-withholding or playing catch-up due to underwithholding for several months. For help in calculating withholding, the IRS built a withholding estimator, found at https://irs.gov/ W4App. Please note that this estimator may not work well for taxpayers with rental properties, those claiming the FEIE, or for those who potentially have other complicated tax issues in their returns. Taxpayers with these complications should complete the worksheets provided with Form W-4 and/or consult a tax professional. Please take particular note that the withholding necessary for a married couple filing jointly with two incomes should account for both spouses’ incomes. The Form W-4 includes optional methods to account for two or more incomes on the withholding under Step 2. Form W-4 no longer allows exemptions for dependents but does account for the child and other dependent tax credits available under current law. Standard Deduction The standard deduction has increased this year to: • $27,700 married filing jointly (MFJ) including qualifying surviving spouses, • $20,800 for heads of household (HOH), specifically defined by Internal Revenue Code (IRC) Section 2(b), and • $13,850 for single taxpayers and married individuals filing separately (MFS). The personal exemption remains $0 for 2023. Capital Gains for Sale of Capital Assets Such As Stocks and Similar Securities Determining the correct tax rate for capital gains requires taxpayers to first categorize their capital gains into shortterm (gain from investments held for less than one year) and long-term (gain from investments held for one year or more). Next, taxpayers net their short-term capital gains (STCG) against their short-term capital losses (STCL), and their long-term capital gains (LTCG) against their long-term capital losses (LTCL). The results are taxed per the illustration below. Any net LTCG that results from this process is taxed at the capital gains rates in the table below: There are exceptions to these rates for certain types of capital gains, such as Section 1202 qualified small business stock, net capital gains from collectibles, and Section 1250 unrecaptured gains (explained in “Investments in Real Estate,” on page 50). Finally, and closely related, an additional 3.8 percent net investment income tax may apply to some forms of investment income, including some capital gains for taxpayers with modified adjusted gross income (AGI) above: • $250,000 for those MFJ or qualifying surviving spouse with a dependent child, • $200,000 HOH or single, and • $125,000 for those MFS.
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