Monday 123: Tax Season Strategies

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Monday, 27 February 2017

Last year we made more than ever before; this year we will make even more.  Because of making more, we have pretty much lost all our tax write-offs, and if we lose the property tax credit and gain taxes on our health insurance – things potentially on the Republican agenda for tax reform – we are screwed even more.  This is not a pleasant prospect to us, especially as we work toward cleaning out debt.

In the desire to escape the debt we have, we are considering the sale of stock I have in an IRA.  We are in a tax bracket where the sale makes no difference – we will just have a higher tax burden at the end of the year, but will not jump to a higher category.  To offset this, the idea is to increase withholding for me, and to increase 401K contributions for Mr. 182.  I need to crunch the numbers to see if this is financially do-able.  Doing this makes sense to get out of debt, and the long term picture is more positive with today’s known facts about tax laws.

The unknowns of our current administration cause me concern for pulling money out of the IRA.  Talk of removing the tax deduction for property taxes and state income taxes, along with taxing healthcare benefits from work, are worrisome.  Increasing our funding the 401K is a smart move, but I need to consider what our final monthly income will be to determine the percentage increase.  We still have other bills, we have a variable mortgage.  Uncertainties need to be considered in the big picture.  I have no desire to dive into something we may not be able to handle six months from now.  In other words, I need a good financial buffer zone, and we are not yet there.

I will not be rushing into the decision to pull money from the IRA.  Instead, I want to take the time to play with the numbers, and think about things.  In my opinion, the IRA is an all-or-nothing proposition.  To use only part of it is not okay.  I have no idea why, except it seems rather half-assed.  Do it or don’t do it.

Plans for 2017

With our taxes now complete, I can move ahead with the next year’s goals more easily.  We get a small amount back from the Feds, and owe the state about $1000.00.  Our goals for 2017 are:

  • increase monthly savings by $500 (if we pay off one credit card using the IRA funds)
  • continue the steady debt reduction
  • stay within budget
  • continue to look for ways to reduce debt
  • work toward increasing pre-tax savings
  • pay cash for everything
  • anything on a credit card is paid off each month
  • review our credit rating mid-year

Looks like a long list, but it really isn’t!  It’s just sorta detailed.

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