State vs Federal Taxes

[WeasleyMum]

DH and I filed our taxes yesterday, with the help of H&R Block. We've always done it ourselves before, but we bought a house last year, sold a lot of stock that I'd had since the 1980's (inheritance), etc. Wanted professional help.

I was pretty sure we were going to owe, b/c of the stock, but we actually came out almost even on the federal taxes: our refund came out to about $30.00 more than what it cost to have them done. We do owe about $1,000 on our Virginia state taxes, though.

This is the second time that we've ended up getting a federal refund but owing the state. Are we doing something wrong with our state taxes? If we claim X dependents at work, does that automatically apply to state tax too? Or do they claim some default number or something? Forgive my ignorance but we moved here from Texas, where there is no state income tax. (I love you, Texas! )

[annethcz]

It is different everywhere. I *think* that unless you specify otherwise, your employer will apply the same number of exemptions for state taxes as for federal taxes.

Each state has different tax laws, so there are no hard and fast rules. But I can tell you that for our particuluar situation, in MN, we generally owe more in state taxes than we do in federal taxes. Our state income tax is based off of the federal AGI. So while we qualify for child tax credits through the federal government, those credits do nothing to decrease our state income taxes. We have adjusted our withholding several times, and we still don't have it right- last year we took 5 fewer exemptions for state than for federal tax withholding, and STILL ended up owing quite a bit extra in state income taxes (while also receiving a large federal income tax refund).

[mightymoo]

We seem to always end up in the same boat, federal refund, owe on the state taxes (we are in MA).

I'm no expert, but I do know that states have different concepts of what's taxable and what's deductible than the federal government. My taxable income for federal purposes is always lower than my taxable income for state. If I remember correctly, MA does not allow deductions for 401k contributions for example.

[my2girlz]

I have no idea, but I'm in MN and we owed $62 for state taxes while we got a decent sized federel refund.

[rebeccalynn]

NC here ... there should be a state w-4 equivalent just have dh ask employer or HR. We personally claim 14 for fed and 12 for state b/c some of the fed deductions/credits do not count as state deductions/credits.

[mightymoo]

I was also going to add, part of the reason we don't adjust federal withholding to get a smaller refund is that they seem to balance out pretty well.

[sunflower.mama]

Yes - we are the same as you MM - we owe state and get back federal, so the federal refund is my cushion against owing for state. We deduct a lot of mortgage interest federally, which we can't do for state income taxes, so that explains it in my mind. Also, did you know that for 08 ( and 09 too I think) people below a certain TAXABLE income threshold - I think it's like 65K for married couples, and remember - taxable income is after deductions - owe no capital gains taxes federally. Usually you'd pay 15% cap gains on the sale of stock. So you are paying state cap gains on your stock sale but not federal. 2008 was a great year for you to sell that stock.

[FillingMyQuiver]

I'm in VA. AFAIK, you need to change your state w/holding separately. We claim 15 for federal, but 5 (last yr, now we claim 6) for state. We ended up w/ a $1000 fed refund and a $1000 state refund