Tax Time 2018

We finished our tax returns just in time for the government to re-open temporarily ... and as I mentioned in our REI post, got our funds already!

When I was fiddling with Turbo Tax, I found out a few cute tidbits reading through our reviews to check them.

We made more money than we did last year! $14.408 more (WOOHOO bigger profit share checks and raises and OVERTIME!)

We apparently withheld MORE money from our paychecks this year than last year (Likely due to the higher profit share check, because our individual paychecks got bigger after the tax changes, not smaller).

We are also getting a $2,000 child tax credit instead of $1,000 due to the tax changes.

And as I mentioned earlier, we are taking the standard deduction federally, and itemizing for the state.

As for the state, apparently Hubs and I made $115 more than the limit for being able to get the California credit for child and dependent care expenses... so even though we paid almost 10% of our income towards daycare, we don't get a credit...

and that kind of blows.

• We could blame our savings account interest... (we keep 6-months of bare bones expenses liquid in a savings account, and that savings account earned over $115 in interest over the course of the year)... So we could look at it as our being smart, cost us a deduction...
• Or we could blame the temporary job promotion I had at the end of the year for 7 weeks while a co-worker was on leave...
• Or a couple hours of overtime for hubs at work... 

but either way, it ended up costing us this credit... and this credit would have been for $1,020..... Okay, now I will breathe and let it go... and no longer dwell on it.... But I had to put it out there once just to get it off my chest.

All in all, we are getting a nice return of  $4,300.00 when we combine our state and federal returns.

You might be like, why give the government a free loan? We don't plan to. We have our deductions set to give us about a $1000 buffer, because our goal is NOT to owe. However, Profit share bonuses from Hub's work can range significantly from year to year, and they hold 50% of it for taxes... so this is like getting his profit share check returned.

Yes it sits with the government for the year interest free, but it would be a LOT harder to adjust our withholding and re-balance our budgets every year to try and guess what the check will be before we get it... and we risk the chance of lifestyle inflation as our paychecks increase and suddenly finding that we "need" profit share to pay the bills, which is not how we want to live and make financial decisions.

So instead, we get a tax return.

Our Effective tax rate for federal was 6.20%... and our effective tax rate for California was 1.90%. Last year our federal rate was 6.32% and our state was 1.23%

What do we plan to do with our return?

The same boring things we did last year!

• Replenish our travel account, and stick the money in savings until profit share, when we hope to top off our emergency fund to bring it to a full 6-months of expenses based off our bare bones budget. We haven't adjusted for inflation for a while and since we are spending down some of our savings for the home remodel, etc. it's time to see how much more we need to add to this account.

After that, its slush fund, and well pull from it though out the year for car repairs and other larger purchases. 

We aren't itemizing...

We have itemized our taxes almost every year since I became a homeowner... and this year, we won't be... At least for our federal return

As I've been working on our taxes, and with the new higher standard deduction, we don't have enough deductions to actually itemize.

It's kind of bizarre to think about. After I added up our charitable donations, our property tax payments, and our mortgage insurance (our big three), we only have $20,560 in deductions and the standard deduction is $24,000.00

So being a homeowner, no longer gives us a federal tax break.

I know we live in a high cost of living area, and choose not to over extend ourselves financially in terms of housing (we did put 50% down, on our current abode)... but i'm wondering how many others this will effect... and if it will change the way they look at how much they owe and their overall debts.

A $155,000 mortgage is fairly normal for other parts of the country, or even a state or two away... and now that mortgage interest might not be deductible.

I wonder if people will stop taking out home equity lines of credit to pay off debt anymore, cause they won't get the tax "deductions" ... Maybe people will start to pay down there homes and treat the debt like actual debt instead of calling it "good debt."

Just some food for thought for today.

Since we won't be itemizing on our federal return, I won't be adding a "tax savings" portion to our total condo costs.... But I will get to for the state. Apparently we will still be itemizing our state deductions!

I did the math (AKA, looked over the returns and re-did the tax tables without our home info in there) and i'll be subtracting $594.60 from our "in the hole amount" for what we saved writing off the property taxes and our mortgage interest.

Are any of you going from itemizing to the standard deduction this year?

Tax Time

We filed our taxes at the end of January... and as I alluded earlier, its a pretty significant chunk of change. We are getting over $4,000 back!

FEDERAL BREAK DOWN:
Adjusted Gross Income $ 85,706.00
Taxable Income $ 52,995.00
Total Tax $ 5,414.00
Total Payments/Credits $ 8,971.00
Amount to be Refunded $ 3,557.00
Effective Tax Rate 6.32%

STATE BREAKDOWN:
Taxable Income $ 66,776.00
Total Tax $ 1,048.00
Total Payments/Credits $ 1,972.00
Amount to be Refunded $ 924.00
Effective Tax Rate 1.23%

$4,481 back to be exact!!!!

So where is it all going? 

To savings cause we are boring people.

Specifically, $1,000 is going to replenish our medical savings account that we drained when we payed for hubs' dental work... which we still need to finish... and will soon...

$725 will go to replenish our vacation fund...

and the $2,756 remaining will be dumped into our Slush fund so we can finish Hubs' dental work. This move buys us a little time to to wait and earmark the $$$ for something more specific. We kind of want to wait to do anything with the money until we see what actually happens with his profit share check in March.

Regardless, February will be a good month for us. I sold over 100 hours of vacation time back and selected February as the month to receive it during last years "sell your time off" enrollment period.

We chose to sell vacation time for the first time to make sure we could afford to send little dude to preschool in the fall. We were looking into a few options and felt a month or so more in savings to cover enrollment and any deposits would be a good idea. I'll post more in more details on this decision at a later date.

2018 Tax Reform & New Budget

$5 Clearance Toy we picked up...
Made for a cheap and fun family
day in the park!

DISCLAIMER: WE (and by that I mean you, me, and the whole blog-o-verse that reads this blog) don't discuss politics here...  so please don't use the comments section to spout anything political (Positive or negative)... 

With that being said, I'm going to mention the 2018 Tax Reform... because it's changing my monthly BUDGET.

It looks like the new tax brackets have reduced the amount of money we have withheld from both our paychecks each pay period.

Hubs and I have always kept our payroll deductions on the conservative side since we never know what to expect with his annual profit share check. We had also planned to change our withholding to reduce the amount of our federal tax return this year... but with the new brackets and the elimination of personal exemptions in favor of a larger standard deduction (we itemize so we loose out here), plus increases in child credits...  we have decided not to adjust our withholding until we get a year to see how the changes go when we file for 2018.

You may have noticed your last paycheck for January was a little different from the first. This was because the tax brackets went into effect about the middle of the month for most agencies.

He loved chasing the darts
everywhere... and there were 2
types and one set went the length
of the park almost!

• It turns out my paychecks will be growing by $46.08 
• Not all of that is coming from tax reform -- 
• We voted to increase our pension payments from 8% to 9.5%, in exchange for more money to cover health insurance benefits (I gained in this decision). My first check had the extra benefits on it, but not the increased pension... So the paycheck that had the new tax formulas, was also the first paycheck I started paying 9.5%.
• All of that combined together, gave us a net increase of $46.08 a check. So the tax reform was probably closer to $30
• Hubs' paychecks would be increasing around $24, but we upped his ROTH IRA contributions to 9%, so we are only seeing $17 increase.

But it's a pretty significant jump for us and helps us breathe a bit. So hubs and I did the same thing we do with any "windfall." We had a budget meeting and decided how to allocate it to. I know that sounds simple, but if you don't give your dollar$ a name and a purpose, they extra money ends up just disappearing on junk and crap... 

We didn't do anything massive with it. We consolidated a couple of things in the budget, rounded off some uneven numbers, and then we decided to mark the additional funds to replenish savings for the moment... We know he's got dental work to do and we haven't replenished our medical savings yet, so stocking this aside until our tax returns and profit share checks come in, will be pretty handy.

Embracing my inner Katniss
Everdeen :) (yes, we decided to
listen to the Hunger Games on
Audible... We are super big
Audio book fans so it's nice to see
it finally have its own line item in
the budget.

So for now, I present our:

2018 Budget

Spending categories:
Mortgage (P&I) $764.00
Property Taxes $280
HOA: $350
Church Tithe: $648 + $20 Fasting
Netflix: $19.16 (Streaming and DVD)
Gasoline and Car Reg: $295.86
Daycare: $900 ($450 bi-weekly)
Discretionary: $102
Pocket Money $78 ($39 each)
Audible: $15
Electricity: $100
Internet: $63.99
Groceries: $332.00
Little Dude: $86
Eating Out / Adventures: $100

Saving for annual and semi-annual expenses:
Christmas Savings: $50
Car Emergency Fund: $100
Car Ins/ Home Ins / Earthquake Ins: $180
Cell Phone plans, phones and electronic accessories: $75
Clothes: $48
Birthday/Gifts: $50
Replenish Savings (Dr, Roxy, Vacation, Slush Fund) $171.03

Tax Time!

Me and turbo tax are bestie bros... not gonna lie. I love software that saves me time and finds me deductions.

I love just being able to roll over some information from one year to the next and with a toddler, making taxes easier is a win, win.

Between the state and the federal, we paid $126.98 to do our taxes because we need to add back in those business deductions now that I'm a Thirty-One Consultant ... and because I can't do state taxes by hand so i might as well pay to get both done.

We're actually getting a nice refund back (not that we try to give uncle sam our money on an interest free loan), but I'm always glad not to OWE money, that's for sure. Between our state and Federal taxes, were getting back $3,632.00 or just over $3,500 after you factor in the turbo tax fee.

Where is it going --- To Savings... mostly

Yup, we are boring practical people, but this chunk of cash is going into savings.

• $500 to our Medical savings account to bring it up to $1K
• $1,000 to our slush fund for larger purchases for the year (our fund is currently at zero and we won't get a profit share check until March and we all breath a little easier knowing we have some mad money set aside in case something pops up that we want to act on or if the computer breaks.).
• $1,500 to our car replacement fund because this is our savings focus!! Both our cars are over 100k and are the same age so we need to start saving now so we have the funds when they eventually die on us.

The last $500 will probably be divided and spent on some initial wants. We had originally thought about getting a new couch, but as luck would have it, we scored a "new to us" couch from a family in our ward that was getting new furniture-- complete with Queen sized fold up bed for when the in-laws come and visit. So we may get a different mattress for the couch bed since our bed mattress we bought from Amazon comes in a 5 inch thick version that's a bit firmer then what we have, but would be better than whats in the couch.

I won't lie. I'ts not a perfect couch, but we are very happy with it and the additional floor space we have too with a traditional couch and not an L couch. We might need to stitch up a fraying end or two, but we are really gratefully to have a couch with support that SCB can actually lie down on and you can't beat free. 

We also really want to clean our carpets, but I have already set aside $300 for this last year so now its just about finding the time. 

I've always loved the Spend / Save / Invest idea when it comes to windfalls and bonus money. Put some aside for spending, some for saving and some for investing (our investing is saving for a new car this go around since we are behind -- but eventually it would be Roth IRA contributions).   

Filing our taxes

We like to file early and get it over with when it comes to the tax man. Especially since I don't want to deal with doing our taxes with a 2 week old baby boy.... That's enough sleep deprivation all on its own then to think about accurately typing in numbers into tax software.

I was a little worried how everything was going to go this year because we had a big jump in income for 2014...

We went from the $50,000 range to the $70,000 range over the course of the year and since our baby is still in my belly, we won't be a family of 3 until we do next years taxes so I was really worried we were going to end up owing money this year.

Realistically I think its good to get a tax refund right in the ball park of $1,000.00 or less. It's a nice buffer so we don't give the IRS a tax free loan on anything more and it gives us a buffer so we hopefully don't owe money since we never know what my husband's profit share check will be for the year which could throw us one way or the other...

Especially when I inputted our W-2's we were in the "owe" category for the year...

but as I continued adding in our church giving, mortgage interest and property taxes we slowly inched out into the green! We will be itemizing our deductions once again because we can write off over $15,500 instead of taking the standard $12,400.00 (which saves us an extra $377 on our federal taxes this year-- Woot for home ownership!).

What is interesting is for the first time in my life, I (and better said we) don't qualify for the savers credit. Not that we added any money to our Roth IRA this year (the first time I have never done so since I was like 20 years old), but we made too much money as a couple to qualify for it.

We will be getting a little over $400 back from the feds and a little over $200 from the state... and we used Turbo Tax so it cost us $61.98 for our state and federal returns so we should be getting just a bit over $500 back after we take into account the tax software fees.

I was glad we didn't have the business expenses to deal with this year! Now what to do with $500....

Property Tax Increase

We got our annual notice of property taxes for the 2014-2015 year. Apparently our condo is valued on a tax basis at $126,358.00... Last year, we were valued at $116,321.00.

 An increase of $10,037.00 worth of taxable value... which means our payment every 6 months will be $669.66 instead of $611.80.

 Here's a snap shot of our bill from last year:



And a snap shot for this year:



The water district increased their rate fee substantially, 307% increase... but the school district reduced theirs so we are paying roughly the same amount with the higher value considered.

In total, we are looking at a 9.45% increase in our property tax bill. Monthly it comes out to an extra $9.65, or an extra $115.72 a year.

Even with proposition 13, our home value increased 8.62%. This is most likely because we had it lowered in the past when the housing market went down and with the market increasing property values, the taxes get to catch back up too unfortunately.