Saturday, February 26, 2005


Owning A Home Is. . .

Just about effin' fantastic.

Why do I say this?

I just did my taxes this morning, my first filing after the first full year of owning a home.

Let's just say that I've discovered the formula for a great day:

Twelve months of nearly-all-interest ridiculous mortgage payments / one exemption = CHA-CHING!
What's shocking is how off I was on my predictions. Like, by a "factor of three"-off. I'm pessimistic that way when it comes to money-- 'tis always safer to underestimate the income and overestimate the bills. But sheesh, I've never been happier being this wrong.

My biggest dilemma right now is figuring out whether I should change my exemptions for next year. While I dislike letting the government sit on my money interest-free, I'm really bad at math, so I've been reluctant to "game the system" when it came to exemptions. I don't mind getting a couple of hundred dollars back every spring in exchange for the peace of mind that comes with knowing that I won't have to *pay* anything in April.

The house, however, changes everything. In a big, huge, Thickburger way.

I guess if I'm smart, I'll up my exemptions, and take whatever extra cash I get each month and increase my retirement plan withholding. Yeah, that would be the responsible thing to do.

Or, I could just road trip to A.C. and bet it all on black. Decisions, decisions. . .

Hey, for once, it's nice to actually have the ability to make decisions. Choice is good.
UPDATE: Oh, one other thing-- this year I discovered for the first time that the federal government counts my state tax refund as income towards the next year's filing.

I'm surprised I never noticed this before (probably because I never got a big enough state refund to make much of a difference), but now that my 2004 Virginia refund is Texas-sized, I learned that my 2005 tax return will include that money as income.


Can someone tell me what sort of self-licking ice cream cone bullshit is this? I'm no constitutional lawyer, but why does this feel like a violation of the 10th Amendment? Or is the 23rd Amendment? Hmmm. Maybe the 45th Amendment? I'm really not good at this stuff.

Hey, my poli-sci degree emphasized carpet bombing and flank attacks. I never bought any of my Con Law books.

Anyways. . . I guess I have many new and wondrous things still to learn about the tax code.

"Can someone tell me what sort of self-licking ice cream cone bullshit is this?"

Uh, there's a way to avoid that, ya know. On your 2005 return, don't deduct your state taxes, and then your refund in 2006 isn't taxable.

Perhaps I'm being too obtuse - the reason the refund is taxable is that you were able to write off all state and local taxes on the prior year's return, and a state/local refund means you didn't actually PAY as much as you deducted on the prior year's return.

But I do like the metaphor "self-licking ice cream cone bullshit", and since I figure you really already knew why refunds were taxable, blurting out an explanation was the only way I'd be able to use the phrase "self-licking ice cream cone bullshit" three times.
Patton is right. Your state refund is only taxable if you take off your state taxes paid from your federal return.

Also, the interest deducted on your house does ease your tax bill somewhat, but you still paid far more than that in interest, so it simply eases the pain. You'd be better off taking the money saved through the interest deduction and rolling it over into a principal payment on your mortgage. That is the one item you will pay the most interest on over your lifetime, so it is good financial sense to pay it off sooner. Plus, lower principal means lower interest which saves money over the life of the mortgage.
Wow, you guys are great. You're like my very own H.R. Block accountants, only you don't charge an arm and a leg, plus you're not Sikhs.

Thanks for the advice!

Now you can buy Tivo.
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