Is there some calculator you can use to figure out the right withholding amount? I always struggle with this and either get a huge refund or end up owing.

Yes, the IRS has a Tax Withholding Estimator on their website that's pretty accurate. Just google "IRS withholding calculator" and it should be the first result. You'll need your most recent pay stub and tax return handy when you use it. The calculator will tell you exactly how to fill out your W-4 based on your specific situation. It even lets you adjust whether you want a bigger refund or more money in each paycheck. I use it every time I get a raise or my life circumstances change, and it's kept my tax bill/refund pretty balanced.

Exactly this. I work in payroll and see this all the time. Payroll systems calculate withholding based on the assumption that each check is what you'll make all year. So if you get a raise midyear, the system doesn't know about your previous lower income months and doesn't withhold enough.

That's a great point about midyear raises. The payroll system treats each check as if you've been making that amount all year, which can lead to significant underwithholding. This is especially true for bonuses or people who get promoted partway through the tax year.

How difficult was it to set up the TOD? Does it offer any advantages over just naming them as regular beneficiaries? I'm trying to keep things as simple as possible while still maximizing the tax benefits.

Setting up the TOD was extremely simple - just a form from my brokerage firm that took maybe 10 minutes to complete. The main advantage is that it's specifically designed for investment accounts and creates a cleaner transfer process. The TOD designation accomplishes essentially the same thing as a regular beneficiary designation, but it can sometimes process more quickly after death and avoids probate. Both methods will give your grandkids the full step up basis benefit. One thing to note - if you have multiple grandchildren and want to specify different percentages or specific assets going to specific grandchildren, the TOD forms typically allow for that level of detail.

Yeah, the UTMA/UGMA accounts are terrible for tax efficiency compared to getting the step up basis. My brother went that route and regretted it. Did you consider a trust at all? I've heard revocable living trusts can provide the step up basis while also giving you more control over when/how the kids get the money.

For the education credits, if I'm claiming my daughter as a dependent, do I have to be the one who claims the education credit even if she paid some of her tuition herself from her 529 plan?

Yes, if you claim your daughter as a dependent, you're the only one who can claim the education credits for her - even if she paid some expenses herself. The person who claims the dependent gets the education credits, period. However, for 529 plan withdrawals, they need to be coordinated with education credits. You can't claim expenses paid with tax-free 529 funds for the education credit (that would be double-dipping). So you'd want to document which portion of the tuition was paid from taxable funds versus 529 funds.

What counts as "support" exactly? Does paying for their phone bill and car insurance count? What about if my son uses student loans to pay for his housing?

Thanks for mentioning this! I just checked and I did see something about education credits in my tax software that might have been wrong. Would claiming incorrect credits cause me to owe more or less though? I'm confused about why this would make my tax bill higher.

If you're seeing a high tax bill, it's likely NOT because you claimed education credits incorrectly - those would actually reduce your tax liability improperly. It's more likely that your tax bill is high because you're not getting the standard deduction that US residents get, and your withholding was too low throughout the year. But it's still important to make sure you're not claiming credits you're not eligible for, as that could trigger an audit later, even if it temporarily shows a lower tax bill. The correct approach is to make sure you're filing as a nonresident alien (Form 1040-NR), checking for tax treaty benefits from your home country, and making sure you're not claiming deductions or credits that only residents can claim.

Not OP but this is helpful. I'm from Brazil on F1 and always confused about state taxes. Does anyone know if Texas has any special provisions for international students? My university says I don't need to file state taxes but I'm worried that's not right.

3 Did you have to fill out any special forms to document the support calculation? I've been trying to figure out if there's an official worksheet or something for this. My son made about $32k from gaming tournaments this year.

18 There's no specific IRS form for the support calculation, but I created a simple spreadsheet showing the total cost of my daughter's support (housing, food, education, medical, clothing, etc.) and what portion I paid versus what was paid from her earnings. I kept receipts for major expenses just in case. For your son's gaming tournaments, make sure you understand if they're considered prizes/awards (reported on Line 8 of Schedule 1) or self-employment income (Schedule C) - they're treated differently for tax purposes. In my daughter's case, her online business income required Schedule C and self-employment tax, which was a big surprise our first year dealing with it.

7 Good question! The kiddie tax only applies to unearned income (investment income, interest, dividends, capital gains) - not to earned income like modeling or acting wages. If your child performer is just earning wages, the kiddie tax doesn't apply at all. However, if they're earning enough that you're investing some of that money and generating significant investment income, then the kiddie tax could come into play. For 2024, the first $1,250 of unearned income is tax-free, the next $1,250 is taxed at the child's rate, and anything above $2,500 in unearned income would be taxed at the parent's rate.