Welcome to the world of W2 employment! That 21% withholding rate is absolutely normal for your income bracket. Here's what's likely happening with your paychecks: Your total tax burden breaks down roughly like this: - Federal income tax: ~10-12% (varies based on your W-4 settings) - Social Security: 6.2% (fixed rate) - Medicare: 1.45% (fixed rate) - State income tax: varies by state, typically 0-6% - Possibly local/city taxes depending on location The good news is that since you started mid-year, you'll very likely get a refund when you file. The payroll system calculates withholding assuming you'll make that salary for the full 12 months, but since you only worked part of the year, your actual annual income will be lower than what the withholding was based on. For next year, once you've been working the full year, the withholding should be much more accurate. You can always adjust your W-4 if you find you're getting huge refunds (meaning you're giving the government an interest-free loan) or if you end up owing money at tax time. The sticker shock of seeing gross vs. net pay is real, but you're in a totally normal situation for someone at your income level!

One thing I'd add to this great discussion - make sure you're also contributing to any employer-sponsored retirement accounts like a 401(k) if your company offers one! These contributions come out pre-tax, which means they reduce your taxable income and can lower that withholding percentage you're seeing. Plus many employers offer matching contributions, which is essentially free money. For example, if you contribute $200/month to a 401(k), that's $2,400 less in taxable income for the year, which could save you several hundred dollars in taxes. It's a win-win since you're saving for retirement AND reducing your current tax burden. Just something to consider as you get more comfortable with your W-2 job!

What about leasing instead of buying? My accountant suggested that leasing a vehicle is better for tax purposes because you can write off the payments directly as business expenses without worrying about Section 179 limitations or later recapture issues when you're done with the vehicle.

Great question about the long-term implications! One thing to keep in mind is that even after your loan is paid off, you'll want to maintain detailed records of business vs personal use if you ever start using the vehicle for personal purposes. The IRS can look back and question your Section 179 deduction if they find the business use dropped below 50% during the recovery period. Also, regarding selling your business - you might want to get the vehicle appraised before making that decision. Sometimes the current fair market value of the vehicle could make it more beneficial to keep it separate from the business sale, especially if the business is selling for a premium that wouldn't fairly compensate you for the vehicle's value. Just make sure you understand the tax implications of either choice before committing to one path. I'd suggest consulting with a tax professional who specializes in small business sales to run the numbers both ways - selling with vs. without the vehicle included.

This is really helpful information! I'm in a similar situation as a freelance consultant. One thing I'd add is that if you're doing a lot of business travel with tolls, consider getting a dedicated business checking account and linking your E-ZPass to that account for automatic replenishment. This creates a clear paper trail that separates business toll expenses from personal ones right from the start. I also keep a simple spreadsheet where I log each business trip with the date, destination, purpose, and estimated toll cost. At the end of the month, I reconcile this against my E-ZPass statement. It takes maybe 15 minutes a month but makes tax prep so much smoother. The IRS loves clear documentation, and having everything organized upfront saves tons of stress later!

One thing I'd recommend is setting up a separate business toll account if your provider allows it. I have two E-ZPass accounts - one for personal use and one strictly for business travel. This eliminates the need to sort through mixed statements at tax time. The business account automatically deducts from my business checking account, creating a clean paper trail. For those using apps like MileIQ, most of them have a notes feature where you can quickly record toll amounts for each business trip. This creates a single record with both mileage and toll data. I also take photos of any cash toll receipts with my phone immediately - they fade over time and become unreadable. Remember that parking fees at client locations are also deductible separately from the standard mileage rate, just like tolls. I keep a small envelope in my car specifically for parking receipts since those are easy to lose track of.

Thank you all for this incredibly helpful discussion! As someone new to homeownership and dealing with this exact scenario for the first time, I was completely lost trying to interpret Publication 936 on my own. I bought my first home in February 2023 and then had to relocate for work, so I sold that house in August and purchased a new one in October. My tax software was giving me numbers that just didn't seem right, and now I understand why - it was treating both mortgages as if I owned them simultaneously. Based on what everyone has shared here, I need to calculate each home separately: - First home (Feb-Aug): mortgage was $425K, so all interest is deductible - Second home (Oct-Dec): mortgage is $820K, so I apply the $750K/$820K limitation The professional insights from Logan and Freya about documentation are especially valuable. I'll definitely create a worksheet showing the ownership periods and calculations, and include the Pub 936 references they mentioned. This community is amazing - you've saved me from either overpaying taxes or potentially getting into trouble with incorrect calculations. Really appreciate everyone taking the time to explain this complex situation so clearly!

This thread has been incredibly educational! I'm facing a similar situation but with a slight twist - I had overlapping ownership for about 3 weeks while closing on both properties. From what I'm understanding here, that brief overlap period might change how I need to calculate things. During those 3 weeks in June 2023, I technically owned both homes simultaneously - my old home with a $380K mortgage and the new one with a $720K mortgage. For that specific period, would I need to use the combined average balance method that TurboTax was incorrectly applying to everyone else's sequential ownership situations? So my calculation would be: - Jan-May: Old home only, $380K mortgage (100% deductible, under limit) - June overlap period: Combined $1.1M total, so $750K/$1.1M = 68% of interest deductible for both properties - July-Dec: New home only, $750K/$720K = 100% deductible (actually under the limit) Has anyone else dealt with this overlapping ownership scenario? The professional advice from Logan and Freya has been so helpful, but I want to make sure I understand how the brief simultaneous ownership affects the calculation.

One additional consideration for your situation - since you mentioned this was a "rough year" with your investments, you might want to think about timing any future capital gains to optimize your tax situation over the next few years. With $9,000 in carryover losses ($1,800 short-term and $7,200 long-term after the 2024 deduction), you have some flexibility in future years. If you're planning to take profits on any investments, consider the character of those gains. Long-term gains are taxed more favorably, but you have more long-term losses to offset them. Also, don't forget that capital loss carryovers never expire - they continue indefinitely until used up. So even if you don't have gains in 2025, you can still use up to $3,000 per year against ordinary income until the full $9,000 is exhausted. At that rate, it would take about 3 more years to fully utilize your carryover losses if you don't have any offsetting gains. Keep good records of your carryover amounts each year, as the IRS doesn't track this for you. Your 2024 tax return should show the carryover calculation, and you'll need those numbers for future returns.

The timing within the tax year doesn't actually matter for optimization - the IRS rules automatically handle the offsetting in the most tax-efficient way regardless of when during the year you realize the gains. Here's how it works: All your capital gains and losses for the year (including carryovers) get netted together on Schedule D using the prescribed IRS methodology. Short-term gains are offset by short-term losses (including short-term carryovers), and long-term gains are offset by long-term losses (including long-term carryovers). If you end up with a net gain in one category and a net loss in the other, they offset each other. So in your example with $2,000 long-term gains and $1,000 short-term gains, plus your carryovers ($1,800 short-term losses and $7,200 long-term losses), here's what happens: - Short-term: $1,000 gains - $1,800 carryover losses = $800 net short-term loss - Long-term: $2,000 gains - $7,200 carryover losses = $5,200 net long-term loss - Total: $800 + $5,200 = $6,000 net capital loss, so you'd get another $3,000 deduction against ordinary income The key insight is that you don't need to time your sales strategically within the year - the tax code does the optimization automatically. Your main strategic decision is simply whether to realize gains or losses in a given tax year based on your overall financial situation.