Recently, I took the time to sit down and do my taxes. I always tend to do them early because I want my refund check back so that I can do something with it. I’ve opened savings accounts with it in previous years, and spent it on vacation as well. I usually don’t have a set location for my refund, although last year it went towards debt. This year I knew was going to be different though, because this is the first year that I’ve worked full time at a “real” job for a whole year (2009 I was full time for about half a year).
After talking with my dad a bit about my finances, he told me that I should plan on owing money this year. I didn’t want to believe him, but decided that I should at least give what he said some thought – after all, I didn’t want to get caught with my pants down. So, I basically got it in my head that I was going to be paying taxes this year. After I was filling in my W2 information (I use turbo tax, free online for simple returns), I put in my income (and for the first time I didn’t wonder where it went) and the number came up – $1250 or so. I gulped pretty loud, but kept on going. My dad warned me about not having many deductions, so I figured it was pretty much stagnant there on out. After finishing my income (with some great tips from Elle over at yakezie on my blog income). I came to deductions. There were quite a few deductions available, but unfortunately I was privy to very few of them.
Student Loans to the Rescue
That will probably be the only time during the year that I’m actually thankful for the interest that I pay on student loans, but they gave me a solid assist now. The student loan interest was able to take my tax bill down to $750, where it ended up staying. While I’m happy for the deduction, You’ll never find me justifying paying almost $2,000 in interest over the course of 12 months for a $500 dollar savings on the tax bill. I’d obviously rather keep the $2,000 during the year and pay the $500 in April, keeping the extra $1,500 for myself.
I did have my vehicle registration to write off, but because I took the standard deduction it didn’t matter.
Make Them Wait
So, obviously this wasn’t completely out of the blue, but it will cut into my debt repayment and could hamper my goals. Instead of dealing with it right away, I’m going to take a bit out of my debt snowball for the next 2 months and pay file towards the end of March. There’s no sense paying them now when it will strain my cash flow and I’ll be paying interest money on loans during the mean time. It’s not like the government needs the money anyway – they’ve obviously got access other sources of money.
How do you deal with your tax bill? What deductions do you claim?