It's getting close to the end of the year, so I thought I would do a series of short posts with some financial aspects that you may want to look into before the end of the year. Today's tip is a way that you may very well be able to get an immediate "raise" in your take-home pay until the end of the year.
Give Yourself an Immediate Raise By Adjusting Your Withholding
Many people don't realize that they can adjust their tax withholding - and can even turn it off entirely in some cases. This is especially relevant if you got a big tax refund last year. Some people view the tax refund as a "gift" from the government, but actually it is your money that they government holds interest free for several months - why not get that money now?
If you are thinking of adjusting your withholding, first run a tax projection for this year (figure out what you think your taxes will be) and compare it to the amount that has already been withheld in federal taxes. If you have already withheld more than your tax liability, then you can stop withholding completely. There is a safe harbor that as long as you end up owing the government less than $1,000, then you are fine - so no need to worry about hitting the tax liability right on the nose.
This can represent a very substantial "raise" to your paycheck. For example, if your federal tax rate was 28 or 33%, if you are eligible to shut off your withholding you will now get that extra 28 or 33% in your paycheck.