Love and Taxes

Trust me, love and taxes aren’t something I typically associate. As an accountant, I loathe the expectation so many people have that I should be some sort of tax wiz. I never studied taxation, and know just enough to be dangerous. I don’t mind paying my “fair share” to support public works, education, etc. I do think our government wastes a ridiculous amount of money. And, despite the fact that I use the program every year, I do think that Turbo Tax makes their program look easier than it is in the commercials. Yes, it does lead you through questions, like “did you buy a house” and “did you get married”. But, as you get further through the process, you do stumble across some sections that are difficult to understand. I always end up questioning whether I made all the right selections. Especially when we’re working on Bryan’s taxes.

It cost me $82.37 to file both my state and federal taxes with Turbo Tax this year. I typically use their “Deluxe” package, which would have cost me about $20 less, but the program kept insisting that I upgrade to “Premier”, because I sold a house in 2015. I knew that there wouldn’t be any tax liability to the sale: I had lived in the house for the required amount of time (I can’t remember if it’s 2 of the last 5 years, or 3), and I didn’t make more than $250,000 off the sale. Actually, I had bought it for $54,900, and sold it for $60,000; By the time you account for improvements, I lost money on the house. The program said that my losses were not deductible. Maybe I needed to file the paperwork for the sale anyways? I was still irritated about paying more.

I filed my taxes online about two weeks ago. I like to get it out of the way early. I also want to get my refund into my hands as soon as possible. Yes, I get a tax refund. Every year, for probably the last ten years. And no, it doesn’t bother me a bit! My refund is typically $1,000-2,000. Divided into 52 pay periods, that’s somewhere between nineteen and thirty-nine dollars a week. It isn’t nothing, but it’s an amount just small enough to get eaten up on random spending without even being noticed. In an average year I have very few deductions, so getting something back also ensures that I don’t end up owing anything.

Which is a good time to bring up the mortgage interest “fallacy”: For years I’ve heard people preaching about the benefits of owning a home because of the mortgage interest deduction. I owned my home for 8 years, and never once was able to deduct the interest. Not once! Why? Because if all of your deductions are less than the standard deduction, then you default to the standard deduction. Which everyone gets, no mortgage necessary. For 2015, the standard deduction for a single filer is $6,300. I definitely was not paying more than $6,300 in mortgage interest each year! Granted, my house was very inexpensive: I bought it for $54,900, which means I wasn’t paying a lot in interest every year. But I could have double, maybe even tripled the price of my home, and still not have been able to deduct the interest! Or only have benefited from the little bit that exceeded the standard deduction.

It took less than a week and a half to get both my state and federal refund. How much did I get? $1,838 from my federal taxes, and $49 from the state. Due to changes in his filing status, Bryan ended up getting much more than we expected. Which is great, considering he’s on layoff right now; It gives him a chance to get caught back up on some of his bills, and gives him a little breathing room until he returns to work.

Typically I’m really good at just taking the money and putting it all towards debt. That was the plan this year. But, I’ve been working really hard on reaching a “middle-ground” between Bryan and I financially. By nature, he’s a spender. I’ve become much more of a saver. I know that it isn’t possible to change him; Instead, I’m working towards encouraging him to look at the big picture, and be more of a planned spender. Instead of just blowing through his entire refund, with nothing to show for it, as he normally would, we’re looking at what he needs that money to go for, and then carving out a portion of the money to spend on specific things. Most of the things he wants to spend on would benefit both of us: Vacations, a new laptop, etc. Because of that, it’s only fair that I also carve out a portion of my refund to go towards those things.

In the end, I decided to put $1,100 towards my car loan, and the other $800 into a vacation fund. We’re still unsure about the laptop, but we plan to spend less than $300 on something basic, so I’m waiting on putting aside money for that. Bryan has talked about giving me back $1,000 from his refund for what I paid extra last month. I’m not pushing for that; I’d rather see him keep his finances stable than pay me back. But, if he does give me money, I’ll put it towards the car loan.

We’re considering taking a vacation in the next month or so, before the construction season starts, and he goes back to work. We’ve been all over the place as far as where we might go; It really depends on where we can get the best deal. I’m kind of holding out for a beach! Last Saturday, we went and stayed a night in his hometown, which is about two and a half hours away. I paid for the hotel, he paid for dinner, drinks, and gas. We had drinks with some of his friends Saturday night, and then a nice dinner together that night. We didn’t even consider that it was Valentine’s Weekend; We had a terrible time finding a place to eat! The next day we spent a few hours with his parents, and then a few hours with his sister and brother-in-law. We didn’t plan it as a “Valentine’s” getaway, but honestly, it was probably one of the best Valentine’s Days I’ve ever had.

Filing our taxes early, and getting refunds, helped us alleviate some of the stress that comes with winter. It gives us a little bit of play in our budgets just when things are starting to get tight, and gives us the opportunity to get away from the frigid and bare Midwest winter days. It’s almost enough to make me love taxes.

Almost.

  • Cindy W.

 

Comments

  1. Like you, our mortgage is too small to itemize. It’s a good problem to have, but it’s still irritating.

    Also, it’s a ridiculous argument anyway. I’ve heard people argue *not* to pay off your mortgage early because of the interest. But it’s not a 1:1 deduction. If you have a 25% tax rate, every $1,000 in interest is about $250 off your taxes. I’d rather have the $1,000 thankyouverymuch.

    I’m excited that we get to actually itemize this year. (I’m easily pleased, apparently.) I’m going to make the most of it with donations, accounting for every medical cost we encounter, etc.

    Luckily, we’re able to use the basic package for Turbo Tax. It’s free for basic and about $18 for state — and we get cash back if we go through Mr. Rebates. That said, I pay around $175 for my S-corp taxes to be done by a CPA. That’s something I’m not trusting to myself or tax software.

    1. I definitely agree on how ridiculous the mortgage interest thing is. The thing is, it’s so ingrained in society that it’s a good thing, that it’s hard to convince people otherwise! I mean, sure, if you have a mortgage anyways, and can’t pay it off, then take the exemption. But some people go out of their way to get the exemption!

      Maybe next year I’ll be able to use the basic package. I couldn’t before because I was going to school, and you need the Deluxe package to get those credits. And then selling the house bumped me into a higher package. Of course, I’ve toyed with the idea of starting an LLC, in which case I’d want to hire someone to do them. So who knows what my tax prep fees will be next year!

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