I got down to business with our taxes yesterday afternoon. I have written before about how I was excited to do our taxes this year, especially because this will be the first year for us to itemize. I guess it really takes a personal finance geek to get excited about itemizing. I used the online program from Turbo Tax to make the process as painless as possible.
Right off the bat I got a bad surprise. Despite completing DW's W-4 to claim no exemptions, her employer still withheld no where near enough taxes. I had a feeling this was happening as I would look at the pay stubs, but I wasn't exactly motivated to decrease her take home pay. The Turbo Tax software I used keep a running tally of your results. I input my W-2 first and was greeted with a refund of several hundred dollars. Next I input DW's W-2 and saw us swing to owing $400. Bummer.
The next step was to start inputing the itemized deductions and credits. It cost me $29.95 to use the Deluxe version of Turbo Tax to get this done, but it was worth it to me for the sheer time savings. If your tax return will not require itemizing (meaning your deductions will be less than $10,300 for joint filers) you should use the FREE version.
The biggest of my deductions was the mortgage interest deduction. We bought a house back in May 2007 so we get to claim this credit for the first time. We also paid 1% of the loan in points and $243.21 on our share of property taxes. All of this pushed our real estate related deductions to $9,127.
The next deduction on the list was $167 for automobile registration for our two cars. After that I had to decide between deducting estimated sales tax or the $2,400 in state income taxes. I got a little lazy and just went with the income tax route. Our sales tax rate approaches 9% between state and local so that may have amounted to more, but it is also a pain in the rear to calculate. Finally, I claimed $400 in business expenses for 2007. This includes some use of my personal vehicle for non-commute work related driving.
The final positive to the bottom line was to claim the Hope Credit for my wife's 2008 tuition. I made sure to pay the bill in December 2007 so it could be claimed on our taxes ASAP. Her half time course load at community college was $665 for this current semester and it was 100% refundable. She will have one more year of Hope Credit left that will apply to 2008 so I look forward to that next year as well.
After deductions and credits we are owed a federal refund of $509.00. It is less than I had anticipated but any refund is better than none. The biggest effect on the bottom line came from my wife's too-low withholding and then a $665 education credit.
As for the state, I will be getting a $410 refund. I used the same data as the federal and Turbo Tax pulled it right over (for a fee of $30 of course) and eFiled for me. I'm not sure why but every year I have gotten a nice sizable state refund. Maybe I should increase the number of exemptions I claim. No sense in giving them an interest free loan every year.
I work for "The Man" in cubical hell. I have a masters degree in engineering. I'm a young guy (mid 20's) and a newlywed. I aspire to be wealthy and financially independent.
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