UGH. I wonder where my level of commitment is to debt repayment? I think I must be making a mistake by socking away as much as I can in my 401k plan. I decided to change my 401k contribution to 17% instead. Hopefully that means that I will be able to move the 3% difference over to debt repayment.
Behind the cut are the tax musings.
As it is, I will be getting some unexpectedly large refunds from my taxes this year. I don’t know if that’s because I used Turbo Tax this year or not. Last year, I only got about $800 back from my Federal taxes. This year, I’m getting almost twice that amount, even without a huge medical deduction. My effective tax rate was under 12%. I know that most people would say that I should change my witholding, but the amount usually hovers around $1000.00, and since my tax returns have changed a lot in the last 3 years, I’m not sure I want to mess around and take the risk of owing anything.
For those of you who don’t read this blog a lot, in the last three years I have done several tax return impacting things that make planning a pain in the neck.
1) I bought a condo. Now I am eligible for the mortgage interest rate deduction, which I never was before.
2) I got about a 40% raise by switching jobs.
3) I am contributing close to 20% of my salary to a 401k plan right now, but I started out putting in only 10% last year.
4) I got another raise at work, which put me into a pay grade eligible for good bonuses.
5) I got a screamin’ good bonus this year, and if the numbers hold, next year too.
6) I am getting side income right now in the 4-figures from some income generating activity, both blogging and non-blogging. (It’s good to be a consultant! Try it! You might like it!)
All of these things add up in a picture that makes things pretty murky. I will likely run some planning numbers again for next year so that I can see if I should go ahead and get laser eye surgery in 2007 and take a massive medical care deduction now, instead of putting aside Medical FSA funds in 2008.
Of course, I am grateful for my recent prosperity, but it’s a blessing and a curse. I’m busy trying to figure out ways to reduce my income even further. I made two small last minute contributions to an IRA plan to reduce my income, but I think I might make too much next year and get phased out on that. If anyone has any suggestions on how to reduce my AGI, short of bearing a child or buying a larger home, let me know. It might be time to go to school and take out some student loans, or pay for some more Oracle classes out of pocket. There just isn’t that much I can do. I never thought I’d be thinking like this. Crazy. I guess I’m not in proverbial Kansas anymore.
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{ 4 comments… read them below or add one }
deductions, deductions!!How about a donation to the Susan G Komen foundation? I am walking the breast cancer 3 day and could use the donation, see my blog for info! LOL !! You also can deduct any mileage when using your personal vehicle for charity.
hmm. this is interesting because my husband and I are also trying to find ways to keep our AGI down for next year. I hope you get some good responses!
Are you maxing out your employer’s matching contribution to your 401K? If you are exceeding it, scale back to the max that your employer will match and put the rest into debt repayment. Just my two cents.
More money, more problems (said the late Notorious B.I.G.), but I think it’s a good problem to have. I’d take figuring out how to reduce my income over figuring out how to increase it any day! Still, I think you’re doing some sensible things and I agree that I wouldn’t mess with withholding given your complex tax picture.