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I have a couple of events which will affect my 2009 taxes.
1) Next week we close on the sale of rental property, which will result in about $12k in long term capital gain.
2) In October we are expecting our second child.

I know that Congress is guaranteed to make tax changes this year, given all the campaign promises and economy "stimulus" business going on. My question is, given what we know today, do I need to adjust my withholding to cover the capital gain or is the increase from the gain balanced by the addition of a child?
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My question is, given what we know today, do I need to adjust my withholding to cover the capital gain or is the increase from the gain balanced by the addition of a child?

Do your taxes on 2008 forms with estimates for what you'll have for 2009.
And it'll probably be close enough for next April.

Or just take advantage of the "safe harbor" for withholding of having withheld 100% or 110% of your 2008 tax liability.

Either way you'll probably want to adjust your withholding - you'll need to submit a new W4 (and state equivalent if applicable) to your payroll department.

A short article about adjusting withholding:
http://www.ehow.com/how_2123361_adjust-tax-withholding.html


PS: Congratulations. (BTW: I'm surprised you're telling people so early. Or is it just because you're quasi-anonymous here?)
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I have a couple of events which will affect my 2009 taxes.
1) Next week we close on the sale of rental property, which will result in about $12k in long term capital gain.
2) In October we are expecting our second child.

I know that Congress is guaranteed to make tax changes this year, given all the campaign promises and economy "stimulus" business going on. My question is, given what we know today, do I need to adjust my withholding to cover the capital gain or is the increase from the gain balanced by the addition of a child?


Based just on the information provided, you're looking at an increase in taxes of somewhat less than $1000. Given the uncertainty of what tax law changes will emerge from Congress and their impact on your situation, I wouldn't make any adjustments other than ensuring that you have more withheld than your 2008 tax liability (110% if AGI >$150k). I also wouldn't plan on the extra exemption for your child until s/he is born. Should tragedy strike during the pregnancy not only would you have to deal with the emotional issues, you would be underwithheld and subject to penalties or last minute scrambling.

Ira
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2) In October we are expecting our second child.

Wow - october is almost a full 9 months away - you're efficient.

WRJ
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