I took advantage of being snowed in this past weekend to get some things done around the house and tackle the dreaded task of completing my taxes. I'd spent the last few weeks gathering all of my W-2's, 1099's and receipts and putting them in a nice pile. Every time I attempt to attack the pile and get my taxes started, something more interesting would get my attention and I would put it off longer and longer. I finally bit the bullet and got it done. 


Image Courtesy: Zevotron

Although it was on the "to do" list, I wasn't in any hurry to get my taxes done since I had a pretty good idea of what the result would be. For the last 3 or 4 years, I have been intentionally underwitholding my federal taxes so that I would get a very small refund or owe a small amount. Unlike most people, I don't look forward to getting a huge tax refund each year. A big refund to me just means I've been letting the government use MY money for free throughout the year. I prefer to get the money throughout the year in my paycheck and earn a few pennies in interest instead of a lump sum once a year. 


The result was that I only owe the federal government $12! Last year, I owed $1533 and the year before that, I owed over $2000. Now that I have the right amount of taxes withheld for the federal government, I need to adjust my state tax withholding. I got a refund of a couple thousand dollars last year from the State of Georgia so I adjusted my W-4 withholding. It didn't do much good because this year, I will be getting a refund of over $2000 again.


One of the things that helped reduce my taxes were some repairs I had to have done to my rental property. I also get to write off the expenses of maintaining the rental property such as lawn maintenance, pest control and depreciation. The other thing that helped was the amount of money I paid in mortgage interest. I didn't pay as much as J over at Budgets Are Sexy but I did pay a tidy sum of over $20,000. I was also able to deduct the interest I paid on my student loan.


Since I put mine out there, now I want to get all up in your tax business.
  • Did you get a refund or do you have to pay? How much?
  • If you are getting a refund, what do you plan to do with it?
  • Do you like getting refunds or do you prefer to get your money throughout the year?
  • Do you do your own taxes or do you pay someone to do them? I do my own using H&R Block at Home.

7 comments

  1. belle // February 18, 2010 at 8:44 AM  

    I have a rental unit too, so I'm not sure how you were able to get a state refund because of it. Rental income is considered income, and therefore only affects your federal property not your state property. The only way I can see you getting money back from the state using deductions from your rental is if you claimed it as a second home, which would be incorrect since you do not use it as such.

  2. Yana // February 18, 2010 at 1:00 PM  

    I have no idea what we will owe this year, but last year it was $512 federal and $170 state. We think getting a refund indicates having done something wrong, but I'd like it to be like your results - owing very little. When we have an option, we don't choose trusting the government with our money. On our worst days, we can do better!

  3. Keith Morris // February 19, 2010 at 3:31 PM  

    We ended up owing $3,000 this year between federal and two states. LOL. But it's less than we had prepared for, so we spent the rest that we had saved on new computers. :) I filed using TurboTax.

  4. velvet jones // February 19, 2010 at 4:23 PM  

    I owed $181 federal, $8 state. It's the first time I ever owed money. I don't own property or anything, so I didn't have any extras to eat that amount down. The $400 making work pay credit helped, so I'm concerned that next year I'll end up owing $500 or $600, which is a lot to me. : /

  5. Money Honey SF // February 19, 2010 at 6:18 PM  

    Hi SGM. I've been holding off with the paperwork for my taxes. It just doesn't excite me this year. Every other year, I would file my taxes once all paperworks are made available.

    Did you get a refund or do you have to pay? How much? Not yet. Maybe around $5K-$6K combine for DH and I.

    If you are getting a refund, what do you plan to do with it? Pay down some debt.

    Do you like getting refunds or do you prefer to get your money throughout the year? I like to get refunds because if I get the money throughout the year, I would most likely be spending it since the amount might not be too big. But if I get it in one big lumpsum at the end of the year, it makes me feel better and I can budget with it better.

    Do you do your own taxes or do you pay someone to do them? Ever since I got married, we have been paying out CPA accountant to do it since we have a home and a rental. Cost is around $250.

  6. Frugal Babe // February 24, 2010 at 11:19 AM  

    I do our taxes myself. It's quite a task, since we own a business, but it's very satisfying to understand exactly how our taxes work.
    Last year, we had huge dental bills, and also maxxed out our IRAs and HSA. As a result, we're getting $5000 back (usually we get a very small refund or owe a little bit). We'll be using the refund to fund our HSA for this year.
    We just set up a SEP IRA through our business, so we'll be getting a nice tax break this year on that. As a result, I just changed our W4s to stop withholding excess taxes - I don't want a refund next year!
    I do our corporate taxes by hand, but I used TaxAct (and love it) for our 1040 and state return.

  7. J. Money // February 24, 2010 at 4:11 PM  

    $20k is just as close ;) One day we'll pay $00.00!!! Only property taxes and relaxation, baby.