From USA Today:
How my Mazda 3 may end up costing me $79,000Quote
You may have heard that a car is among the worst investments you'll ever make. Although the value of car ownership is not strictly financial (think of the freedom it brings!), a car's value drops the second you drive it off the dealership lot, maintenance costs can pile up quickly, and some of us would find it cheaper to get around by bike or public transit.
That said, it's not easy to come by evidence supporting the widely held notion that a vehicle is a losing investment. I mean, who tracks every car-related expense throughout years of car ownership?
Well, I did, actually.
I've tracked every single car-related expense since I purchased my Mazda 3 hatchback in June 2013 – every purchase of gasoline, every mile driven per tank of gas, every oil change, every tune-up, and every insurance payment. This nerdy habit has given me some unexpected insights into car ownership that may shed some light on the true cost of car ownership.
FULL ARTICLE HERE (http://markholtz.info/1gc)
And now let's compare the comparable cost in bus fare, train fare, and ticket (bus, train, airline) costs, as well as taxi (including Uber and Lyft) costs (taxis sure as hell aren't cheap). That's the only way to accurately determine if you gain or lose by owning a car. I'll bet you actually save money over the long term by owning a small, dependable fuel efficient vehicle that you keep a decade or more. Also, remember that time=money as well.
Quote...a car's value drops the second you drive it off the dealership's lot...
Ugh. Such an inaccurate statement.
Let's say you buy a car, take it home, and the next day you want to return it. The dealership agrees to buy it back for what you paid, less $1,000. The car still retains the same value, but the dealership has to pay to wash it, clean the interior, put it back on the lot, and advertise it. All of that costs money. The dealership isn't going to take it back and give a full refund, putting money into it, then selling it for a thousand more than it was sold the previous day.
When you return a product to a store, technically they incur the same costs. This is why some stores charge restocking fees. The product didn't lose 15% of its value in a week; the store incurs expenses when a product is returned.
Most stores are willing to eat those costs in order to retain customers. But in reality, those expenses are already paid by us as part of the price of the products we buy.
Quote from: jeffandnicole on September 01, 2016, 05:14:21 PM
Quote...a car's value drops the second you drive it off the dealership's lot...
Ugh. Such an inaccurate statement.
Let's say you buy a car, take it home, and the next day you want to return it. The dealership agrees to buy it back for what you paid, less $1,000. The car still retains the same value, but the dealership has to pay to wash it, clean the interior, put it back on the lot, and advertise it. All of that costs money. The dealership isn't going to take it back and give a full refund, putting money into it, then selling it for a thousand more than it was sold the previous day.
If you get your tag and title there, that has to be corrected. The accounting department to has to back out a deal from the records and report it as well. If you up-sell yourself into the more expensive car, you might be able to do a full exchange in a few days. Unless your dealership is in a remote area or a small town, your old vehicle is pretty much gone in 2-5 days (unless it was a desirable model in great condition to re-sell). That said, pretty much all vehicle sales are essentially final unless they're bona fide lemons (this is actually extremely rare). That said, in most cases, it's about the only major purchase that people genuinely use the repair warranty and dealerships are typically glad to take care of, to retain loyalty.
I also detest the false concept of automobiles as investments; sure, as long as you think clothing, furniture, and cell phones are "investments". If you do, I will cease to take any advice from anyone with those kinds of thoughts. They're durable goods, but with questionable shelf lives.
With the exception of limited-production exotic cars, nobody in their right mind thinks of them as some sort of financial instrument, because there's nearly zero scarcity. Automotive production hasn't slowed to any serious amount in 70 years. Occasionally, some older vehicles rebound slightly in a certain group of collectors, or unusually low-mileage or well-kept examples of cars not normally found in mint condition...but only to the right buyer seeking nostalgia or desiring something rare.
When it's all said and done, a daily-driven vehicle is just a mobile suit of armor that lets you go 45 miles an hour without a bird striking you in the face. They all wear down and there's enough used examples out there for everyone and their pets to own one, if they could. The only thing you do is keep maintaining or repairing it until it's no longer a wise use of time and money...just like everyone else.
But these days, cars are actually much less expensive to maintain. Sure, the oil costs more than before, and tires get more expensive, and the cost of labor goes up, but factor that with the cost of living, and that vehicles are more reliable and trouble-free in their first 3-5 years than ever before means that maintenance costs are way down. Many fluids last longer and have longer service intervals, drive/accessory belts last longer, and many vehicles no longer have costly timing belt replacements. Gas is currently lower in price per gallon now than it was averaging 10 years ago (yes, early-2015 and early-2009 had lower per/gallon prices, but in shorter stints).
Most customers I'd take care of rarely spent more than $1500-2000 in maintenance the first five years of ownership; figure on one front brake service, 4 tires, a few filters and some wiper blades in that time. An even cheaper car might be less than that, and a performance car is likely to need more (those low-profile tires ain't cheap).
Where did the idea of considering a car as an investment or financial asset come from? A car isn't either of those things, and it's not a liability either... it's an appliance, just like a dishwasher or refrigerator.
To me, a car is freedom. A car means that it take me 20 minutes to get to work instead of 90. A car means that I can get home at night since public transportation stops running at 10 PM, but I get off at 2:30 AM.
And, at no point do I consider my car an "investment". I do the proper research to make sure I get good value and a good feature set so that my vehicle lasts and not found on road dead.
Quote from: ZLoth on September 01, 2016, 09:26:20 PM
To me, a car is freedom. A car means that it take me 20 minutes to get to work instead of 90. A car means that I can get home at night since public transportation stops running at 10 PM, but I get off at 2:30 AM.
And, at no point do I consider my car an "investment". I do the proper research to make sure I get good value and a good feature set so that my vehicle lasts and not found on road dead.
IMHO,
- It is certainly correct to say that a car is not an "investment". For the vast majority of Americans it is simply an expense of life, like housing (which may or may not be an investment, but is rarely all that good of one), food, utilities, clothes, so on. An investment, properly defined is money you defer into some financial instrument that will (hopefully) appreciate for spending at some point later in your life, or money or other valuable things (including time) you spend in an income generating endeavor.
- It is also correct to say that a car represents freedom. The lifestyles that the vast majority of people choose involves the ownership of a car. A tiny fraction of society chooses a lifestyle where comunal transit is important.
- As noted the author does not bother to say how much the (highly taxpayer subsidized, but that is another story) comunal transit alternative would be. And she notes that over half of her total car use are "road trips". Which, without car ownership, she would not have been able to enjoy, unless she rented a car or a least not without spending money on rental cars or inter city comunal transportation.
Quote from: SP Cook on September 02, 2016, 09:24:25 AM
- As noted the author does not bother to say how much the (highly taxpayer subsidized, but that is another story) comunal transit alternative would be. And she notes that over half of her total car use are "road trips". Which, without car ownership, she would not have been able to enjoy, unless she rented a car or a least not without spending money on rental cars or inter city comunal transportation.
And, without car insurance, she may not be able to rent a vehicle, or she may have to use the very expensive insurance offered by the rental company. That's an additional cost when not owning a vehicle and having one's own insurance.
Quote from: Rothman on September 02, 2016, 08:46:07 AM
Quote from: ZLoth on September 01, 2016, 09:26:20 PM
To me, a car is freedom. A car means that it take me 20 minutes to get to work instead of 90. A car means that I can get home at night since public transportation stops running at 10 PM, but I get off at 2:30 AM.
And, at no point do I consider my car an "investment". I do the proper research to make sure I get good value and a good feature set so that my vehicle lasts and not found on road dead.
So I take it the OP isn't a Ford fan (found on road dead) or do I just know way too many car memes?
Quote from: Max Rockatansky on September 02, 2016, 10:57:40 AM
Quote from: Rothman on September 02, 2016, 08:46:07 AM
Quote from: ZLoth on September 01, 2016, 09:26:20 PM
To me, a car is freedom. A car means that it take me 20 minutes to get to work instead of 90. A car means that I can get home at night since public transportation stops running at 10 PM, but I get off at 2:30 AM.
And, at no point do I consider my car an "investment". I do the proper research to make sure I get good value and a good feature set so that my vehicle lasts and not found on road dead.
...
So I take it the OP isn't a Ford fan (found on road dead) or do I just know way too many car memes?
The latter :bigass:
First On Race Day (http://performance.ford.com/series/ford-gt/news/articles/2016/06/ford-wins-le-mans--.html)
People have funny ideas about what is and isn't an investment. Many people learned the hard way in the late 2000s that maybe houses aren't as good an invesment as they were made out to be...
Quote from: DaBigE on September 02, 2016, 12:11:34 PM
Quote from: Max Rockatansky on September 02, 2016, 10:57:40 AM
Quote from: Rothman on September 02, 2016, 08:46:07 AM
Quote from: ZLoth on September 01, 2016, 09:26:20 PM
To me, a car is freedom. A car means that it take me 20 minutes to get to work instead of 90. A car means that I can get home at night since public transportation stops running at 10 PM, but I get off at 2:30 AM.
And, at no point do I consider my car an "investment". I do the proper research to make sure I get good value and a good feature set so that my vehicle lasts and not found on road dead.
...
So I take it the OP isn't a Ford fan (found on road dead) or do I just know way too many car memes?
The latter :bigass:
First On Race Day (http://performance.ford.com/series/ford-gt/news/articles/2016/06/ford-wins-le-mans--.html)
I prefer the negative car acronyms thank you very much. :-D
https://www.allacronyms.com/FORD
https://www.allacronyms.com/MOPAR
https://www.allacronyms.com/MOPAR
https://www.allacronyms.com/PONTIAC
https://www.allacronyms.com/CADILLAC
https://www.allacronyms.com/OLDSMOBILE
https://www.allacronyms.com/BUICK
https://www.allacronyms.com/SATURN
https://www.allacronyms.com/HUMMER
https://www.allacronyms.com/MERCURY
https://www.allacronyms.com/LINCOLN
https://www.allacronyms.com/DODGE
https://www.allacronyms.com/PLYMOUTH
https://www.allacronyms.com/CHRYSLER
https://www.allacronyms.com/HONDA
https://www.allacronyms.com/TOYOTA
https://www.allacronyms.com/NISSAN
https://www.allacronyms.com/BMW
https://www.allacronyms.com/MERCEDES
https://www.allacronyms.com/VOLKSWAGEN
https://www.allacronyms.com/FIAT
Quote from: vdeane on September 01, 2016, 08:31:19 PM
Where did the idea of considering a car as an investment or financial asset come from? A car isn't either of those things, and it's not a liability either... it's an appliance, just like a dishwasher or refrigerator.
When I look at a shopping center parking lot, most of what I see are appliancemobiles. Who would have thought the 21st century would have such ugly vehicles? Give me the year 1967 back please!
Rick
I think a car CAN be an investment, but I also think the cars that fall into that category are well beyond the financial means of most ordinary people. Think some Ferraris, for example. Of course it's a gamble whether any particular model will become desirable enough to warrant considering it as a potential "investment," and then you have the really ludicrous ones that are so expensive that it's hard to imagine them ever appreciating (the Bugatti Veyron being the prime example in my mind–hard to imagine a car that sold new for €2.7 million ever appreciating). It's a very fine line, I guess.
I don't consider a car an "appliance." If I did, I'd probably drive a Prius or a Camry–both perfectly serviceable and reliable vehicles that are about as exciting as a laundry machine or a refrigerator. But I also don't consider one an investment in the sense of something I expect to give me a serious financial return. If you use the term "investment" in the sense that it's worth "investing" the money and time to make sure you get a good, reliable car you enjoy driving and will keep for many years, then in that sense I would agree that there's an "investment" involved, and of course I think it's worth "investing" the money and effort to maintain a car correctly.
I've seen ads for very expensive cars that call them "investments"... in an attempt to convince rich people to pay crazy money for a vehicle.
Liar. This isn't your Mazda 3.
Quote from: NE2 on September 04, 2016, 03:30:16 PM
Liar. This isn't your Mazda 3.
If the author paid for it with no loans taken out, it actually is his Mazda 3.
But the author didn't make this thread.
Quote from: AlexandriaVA on September 02, 2016, 12:23:37 PM
People have funny ideas about what is and isn't an investment. Many people learned the hard way in the late 2000s that maybe houses aren't as good an invesment as they were made out to be...
Like any investment, one needs to research when it's time to buy and the time to sell. For many people in that era, they bought when the price was high. The value went down a few years later. Bad investment.
BUT...there were plenty of folks that wanted to sell during that era. They had owned their houses for decades. They sold very high. Awesome investment!
Quote from: NE2 on September 04, 2016, 05:02:04 PM
But the author didn't make this thread.
(https://www.aaroads.com/forum/proxy.php?request=http%3A%2F%2Fwww.facepalm.com%2Fimg3%2Fdouble-facepalm-13590_w.jpg&hash=093d19ceb0b392b992258ec08a3c7e3e9c1cdb62)
Quote from: jeffandnicole on September 01, 2016, 05:14:21 PM
Quote...a car's value drops the second you drive it off the dealership's lot...
Ugh. Such an inaccurate statement.
Let's say you buy a car, take it home, and the next day you want to return it. The dealership agrees to buy it back for what you paid, less $1,000. The car still retains the same value, but the dealership has to pay to wash it, clean the interior, put it back on the lot, and advertise it. All of that costs money. The dealership isn't going to take it back and give a full refund, putting money into it, then selling it for a thousand more than it was sold the previous day.
When you return a product to a store, technically they incur the same costs. This is why some stores charge restocking fees. The product didn't lose 15% of its value in a week; the store incurs expenses when a product is returned.
Most stores are willing to eat those costs in order to retain customers. But in reality, those expenses are already paid by us as part of the price of the products we buy.
LOL at Blockbuster we had the $1.25 restocking fee, which meant me walking the movie back to the shelf
Quote from: AlexandriaVA on September 02, 2016, 12:23:37 PM
People have funny ideas about what is and isn't an investment. Many people learned the hard way in the late 2000s that maybe houses aren't as good an invesment as they were made out to be...
like someone who once called a student loan "good debt"
Quote from: texaskdog on September 05, 2016, 10:03:32 AM
Quote from: AlexandriaVA on September 02, 2016, 12:23:37 PM
People have funny ideas about what is and isn't an investment. Many people learned the hard way in the late 2000s that maybe houses aren't as good an invesment as they were made out to be...
like someone who once called a student loan "good debt"
Until the late-2000s, student loan debt was considered less harmful to your credit score than than other debt. Then again, home and car loans were given to folks without a job nor wallet. Statistics have shown that most student loans were, in fact, repaid in full; they usually have lower rates of interest and more time to pay them off, and lenders gave greater latitude for forbearance. It's probably because if you default on it, there's nothing tangible to repossess (note to self: sell mind-control ray to credit-scoring agencies and rule world).
Real estate is still a far-greater investment than just about any car; while there's always risk and places in the middle of nowhere that won't appreciate for decades, or neighborhoods that fall into serious decline, most real estate has a good chance of increasing in value. The land itself is scarce; it's just that buying the home at the "right price - right time - right place" isn't going to work out for everyone.
Student loan interest is also deductible on your federal taxes, subject to certain limits, and you don't have to itemize to get the deduction. So there's that.
Homes generally increase in value only in an amount that matches inflation. The only time home prices increased faster than inflation was the housing bubble.
Counterpoint on student loans: they can't be discharged in bankruptcy, lenders can garnish your wages if you miss payments, and they're getting larger and larger when the economic prospects for young people are getting poorer and poorer. Were it not for my student loans, for example, I'd be able to own my car outright instead of leasing, and they're a factor in why there aren't many millennial homeowners.
IMHO,
- WISE student debt, which is to say debt used to attend a state college or community college in your own state in order to become qualified for a profession for which you are suited which has a value in the Market which will increase your earnings potential by significant amount, is "good debt". All other forms are foolishness.
- While it is mostly true in the short term that house values only increase roughly in line w/ inflation, in the longer term the underlaying value of the land can change this. Which is to say if one has a home, or just land, near a metropolitan area which is growing, the land is becoming more valuable each day, as the "highest and best use" slowly changes from "farm" or "excess rural land" or "timber" to "residential" or even "commercial". Certainly a home near DC in 1955 was worth many times the amount of inflation relative to 1935.
- While the economic value of a car does not really change on the "first mile", the fact of the matter is the retail value does. The first mile is the most expensive mile.
It is astonishing to me how much the cost of higher education has skyrocketed in the past 20 years. The current PER-YEAR cost estimate to attend the law school I attended is now $77,000, i.e. $231,000 for the full three years. That's insane.
Quote from: 1995hoo on September 06, 2016, 03:17:48 PM
It is astonishing to me how much the cost of higher education has skyrocketed in the past 20 years.
Between the cost of college pretty much tripling/quadrupling in the past twenty years and the higher standards of admission, I probably would have just jumped right into community college, fearing the debt by taking the high road...but you don't think like that when you're 18. You aim high, and rightfully so when you really only have one shot at it.
I guess those ever-skyward technology limits and the spiffy college football team have to get paid for somehow, because it rarely went into salaries and convenient parking spaces!
Quote from: vdeane on September 06, 2016, 01:38:04 PM
Homes generally increase in value only in an amount that matches inflation. The only time home prices increased faster than inflation was the housing bubble.
That completely depends where you are. Markets I'm familiar with, San Francisco Bay Area and Seattle, housing prices have been increasing much faster than inflation for many decades. The housing bubble bursting caused a yearlong pause in the increase in value in desirable in-city locations, not a decrease in value. Not claiming that they never could decrease, just that it seems like a lot better investment than, say, stocks.
Let's see, the last substantial decrease for desirable city locations in the Bay Area was probably the 1930s.
And for Seattle, the Boeing bust of the mid 1970s. Seattle's economy has diversified since and is now less vulnerable to a single industry. Except maybe coffee.
Quote from: vdeane on September 06, 2016, 01:38:04 PM
Homes generally increase in value only in an amount that matches inflation. The only time home prices increased faster than inflation was the housing bubble.
You don't need to beat inflation for something to count as an investment. Anything that matches inflation increases in value more than cash does, after all.
Home ownership as an investment is also often compared to renting (you have to live somewhere, after all, so you have to rent if you don't buy), where it is clearly the better of the two options since even if the price of the home decreases in nominal dollars, you are still left with some value whereas renting leaves you with nothing.
Quote from: Brandon on September 01, 2016, 04:22:36 PM
And now let's compare the comparable cost in bus fare, train fare, and ticket (bus, train, airline) costs, as well as taxi (including Uber and Lyft) costs (taxis sure as hell aren't cheap). That's the only way to accurately determine if you gain or lose by owning a car. I'll bet you actually save money over the long term by owning a small, dependable fuel efficient vehicle that you keep a decade or more. Also, remember that time=money as well.
If you're physically fit enough for it and live in a location where you have no regular need to travel more than a couple dozen miles from home, the cheapest practical option is likely to eschew motorized transportation entirely and get a bike to ride everywhere. No fuel costs or insurance costs, and the price of one is a lot less than a car. The exercise may save you money in the long run in healthcare costs as well.
Of course, this means getting by with minimal cargo capacity and no protection from the elements, and depending entirely on your own energy to get anywhere. In reality most people won't be willing to live with these limitations and will find themselves spending money on taxis or transit when the weather is nasty, when they need to transport something large, when traveling with friends, when they're drunk or tired, etc.
Quote from: Brandon on September 01, 2016, 04:22:36 PM
And now let's compare the comparable cost in bus fare, train fare, and ticket (bus, train, airline) costs, as well as taxi (including Uber and Lyft) costs (taxis sure as hell aren't cheap). That's the only way to accurately determine if you gain or lose by owning a car. I'll bet you actually save money over the long term by owning a small, dependable fuel efficient vehicle that you keep a decade or more. Also, remember that time=money as well.
I lived in the Chicago suburbs with no car from the end of 1999 until the spring of 2006, save for a period of less than a year when I had a vehicle. I got around by a combination of means: local bus, commuter train, the L, bicycle, walking, hitchhiking, and often a combination of two or three of those. For example, a trip into the city might involve bicycling a mile, taking a commuter train, transferring to a local bus, and then walking a mile. My transportation costs included a $50 monthly bus pass, plus maybe $30 in various train fares a month. Even figuring one long-distance trip every other month by Greyhound bus for $160 brings the average monthly total to $160.
$160 would easily have been the comparable cost of car insurance plus gasoline, not to mention repairs and maintenance. So, for me at least, owning a car would only have been a net gain if the car itself were free. That brief period during which I owned a car, in fact, was due to my buying a 1987 Corolla hatchback for 50 bucks. The cost of owning it was comparable to using public transit and whatnot, but needed repairs were financially out of reach for me at that time. I literally could not afford to renew the tags because I didn't have the money to replace the exhaust line for it to pass emissions testing. So I sold it and went back to the cheaper alternative.
Now that I'm married with three children, I've become more or less dependent on a car. My job is a few miles past the edge of the local bus network, groceries are a lot bigger of an operation than they used to be, we're busier than we used to be with less time for transiting from A to B. But we've never owned more than one vehicle, and we don't intend to. Even back when I worked three miles from home and my wife worked in another county, we got by with one car. I would ride a bike, walk, hitchhike, whatever. Because owning a car is not profitable, and owning two is a losing proposition.
Oh, by the way, time is not money. Money is money. I have less free time now than I used to, which means I value it more than I used to, but I in no way make more money by having more free time.
Quote from: 1995hoo on September 06, 2016, 01:17:49 PM
Student loan interest is also deductible on your federal taxes, subject to certain limits, and you don't have to itemize to get the deduction. So there's that.
But it's not good to have debt, and there is no guarantee it gets you a better job.
Quote from: SP Cook on September 06, 2016, 02:10:22 PM
IMHO,
- WISE student debt, which is to say debt used to attend a state college or community college in your own state in order to become qualified for a profession for which you are suited which has a value in the Market which will increase your earnings potential by significant amount, is "good debt". All other forms are foolishness.
- While it is mostly true in the short term that house values only increase roughly in line w/ inflation, in the longer term the underlaying value of the land can change this. Which is to say if one has a home, or just land, near a metropolitan area which is growing, the land is becoming more valuable each day, as the "highest and best use" slowly changes from "farm" or "excess rural land" or "timber" to "residential" or even "commercial". Certainly a home near DC in 1955 was worth many times the amount of inflation relative to 1935.
- While the economic value of a car does not really change on the "first mile", the fact of the matter is the retail value does. The first mile is the most expensive mile.
http://www.daveramsey.com/blog/domino-effect-of-student-loans
Ramsey has been selling his particular brand of snake oil for many years. It can be summed up as:
- Don't borrow any money.
- Live like a hermit, drive a POS car, never go on vacation, shop at Goodwill, eat scraps, wear shoes with holes in them, never eat out, etc.
- Put all your $$ in mutual funds (because you are too stupid to actually invest yourself). Which before the Asian crash of the 00s was "put all your $$ in Asian mutual funds because the USA is going to hell in a handbasket".
And, I suppose die, having never enjoyed a pleasure of any type and, I suppose leave the money in the old McDonald's bag under your tenement bed to your kids to miser for another generation. Unless he has figured out how to beat death, which I doubt.
He is a buffoon.
Fact is that, while the sources differ on the exact figures, all agree that college graduates earn MILLIONS more than people with less education over a lifetime. For many, perhaps most, people borrowing is necessary to achieve that skill level.
As I said, one of course should only consider public schools in one's own state and one should major (and if you are in college and are "undecided" you have no business in college) in a skill to which you are suited and which is of value to the Market. And, of course, one should reduce the amount of borrowing in every way one can (community college, stay at home, work, work-study, military service, etc.)
But "don't go to college" is among this idiot's worst advice.
Quote from: SP Cook on September 18, 2016, 10:45:14 AM
Fact is that, while the sources differ on the exact figures, all agree that college graduates earn MILLIONS more than people with less education over a lifetime. For many, perhaps most, people borrowing is necessary to achieve that skill level.
But it depends on the college degree. It's one thing to get a degree aimed at going into a field that requires one, or that will limit you to bottom level positions without one. It's another thing to major in a subject that interests you but have no clear plan for turning it into a career, and then end up stuck attempting to pay off your student loans working at Starbucks. THAT is the trap to not fall into. A college degree is an investment, don't make it without a specific payoff in mind.
With regards to it being an investment it also depends on the school. Some are more expensive than others and the more expensive schools do not typically pay for themselves in higher salaries later on. Indeed, what school you went to is basically meaningless for every job after your first so long as you have a valid degree. Employers will be looking more at your work experience.
There's definitely truth to the idea of the loan holding you back. I have a student loan that amounts to $315/month (though I actually pay $400/month since I don't want to wait eight more years to get rid of what amounts to my biggest single expense after rent). Because of that loan, I was not able to afford to buy my car outright and was forced to lease it instead (which is quite inconvenient; I'm sick and tired of tracking my mileage). Next year, when I would have had a car loan paid off, I'll instead be spending a large chunk of my savings (which is supposed to act as my emergency fund, which also isn't growing as fast as it could because of my student loan payments) as a down payment on another loan to buy out my car lease. I'm also living in constant fear of increases in rent and health costs (and with a 50% hike in premiums and copays rumored for the next union contract, I'm definitely worried; Cuomo will NOT back down). Hard to save as much for retirement as I should too; hope NY's pension plan doesn't get taken away at any point in the next 40 years!
Even majors in STEM aren't a guarantee of employment because employers are importing workers from India (and paying them less) and replaced entry level jobs with poorly paid (or unpaid) internships that don't pay the bills. You pretty much have to be a superstar (but not too much, because then employers know you'll leave when you get a better offer), have a ton of experience (ditto), or know someone to get a job at anything other than flipping burgers these days.
Quote from: vdeane on September 18, 2016, 08:03:48 PM
replaced entry level jobs with poorly paid (or unpaid) internships that don't pay the bills.
Or, in many cases, with computers. Great example: entry level jobs in the legal profession traditionally involved a lot of discovery work. Someone needed to manually go through a stack of documents and highlight every reference to something in particular, dig through the file room for every document relevant to that reference, etc. Before computers this could easily be a full day's work or more for just one case. Now a computer program can do all that in two minutes and there's no more need for the entry level grunt. As a result, there is now a problem of people fresh out of law school, once a golden ticket to a well-paying career, unable to find jobs because law firms have no use for them.
QuoteYou pretty much have to be a superstar (but not too much, because then employers know you'll leave when you get a better offer)
Or be too expensive. Bean counters at large companies always harass managers about employees whose salaries are significantly above the median for their position. You think it's difficult finding a job as a recent college graduate, try being unemployed and over the age of 50. At that point no one wants to hire you because you have too much experience and employers aren't willing to pay for it. Not when there's an abundance of 20-somethings willing to do the same work for much less.
Quoteor know someone
Yep, well, such is life. In a world where you can get 100 applicants in a week from an online job posting, you need to sift through them somehow. Your buddy saying "oh yeah, I know that guy, he does great work" is the single greatest way a particular applicant can stand out.
This does, unfortunately, mean that if you're not big on schmoozing you are at a disadvantage in life. It is said that half of all positions are filled without them ever being posted. Your professional connections will get you a job much more effectively than your resume ever will.
Quote from: texaskdog on September 18, 2016, 01:57:31 AM
Quote from: 1995hoo on September 06, 2016, 01:17:49 PM
Student loan interest is also deductible on your federal taxes, subject to certain limits, and you don't have to itemize to get the deduction. So there's that.
But it's not good to have debt, and there is no guarantee it gets you a better job.
Debt isn't totally bad, especially when you're trying to build a credit history. The key is to minimize it, minimize the interest, and absolutely make sure those payments are on time.
People say that as long as you can write off the interest on your taxes its fine. Many of these people don't understand you can't write off the entire interest, just a portion. And many people just take the standard deduction, so their mortgage interest isn't even a write off.
Minimizing interest on student loans ranges from hard to impossible. Not only is the interest rate higher than on home/car loans, but instead of just paying interest on the principle, it's compounded daily. About a third to half of my student loan payments go to interest alone.
Not sure where this whole idea of writing off interest on taxes came from. No amount of tax deductions will equal or surpass the total amount of money you're paying in interest. Plus it's generally best to just take the standard deduction anyways. Unless you have a ton of deductions, itemizing them just leads to headaches, a larger tax bill, and a random chance of an audit.
Quote from: vdeane on September 19, 2016, 01:22:18 PM
Not sure where this whole idea of writing off interest on taxes came from. No amount of tax deductions will equal or surpass the total amount of money you're paying in interest. Plus it's generally best to just take the standard deduction anyways. Unless you have a ton of deductions, itemizing them just leads to headaches, a larger tax bill, and a random chance of an audit.
If you are renting your home, then taking the standard deduction is usually best. If you are a homeowner with a mortgage on your property, itemizing your deductions, which isn't terribly complicated to do, almost always results in a lower tax bill (or a larger refund). Mortgage interest, property taxes, and state and local taxes you pay, as well as excise taxes on certain personal property such as your car, are all deductible - and are either already reported to the IRS or are available on the public record for an IRS inspector to easily verify. Limited deductions only come into play if you're above a certain income level. And, unless you're showing a large amount in charitable deductions, the likelihood of you getting audited is only marginally greater than if you take the standard deduction.
Quote from: roadman on September 19, 2016, 01:48:40 PM
Quote from: vdeane on September 19, 2016, 01:22:18 PM
Not sure where this whole idea of writing off interest on taxes came from. No amount of tax deductions will equal or surpass the total amount of money you're paying in interest. Plus it's generally best to just take the standard deduction anyways. Unless you have a ton of deductions, itemizing them just leads to headaches, a larger tax bill, and a random chance of an audit.
If you are renting your home, then taking the standard deduction is usually best. If you are a homeowner with a mortgage on your property, itemizing your deductions, which isn't terribly complicated to do, almost always results in a lower tax bill (or a larger refund). Mortgage interest, property taxes, and state and local taxes you pay, as well as excise taxes on certain personal property such as your car, are all deductible - and are either already reported to the IRS or are available on the public record for an IRS inspector to easily verify. Limited deductions only come into play if you're above a certain income level. And, unless you're showing a large amount in charitable deductions, the likelihood of you getting audited is only marginally greater than if you take the standard deduction.
And since you're a gov worker, you can also possibly itemize union dues, medical expenses and other items, subject to floors. Mine always are under those floors so I can't, but the ability to do so does exist.
For the most part, as mentioned, those that itemize can save a significant amount on their taxes. Basically, for the top 3 sections of Schedule A (Medical/Dental expenses, Interest & Taxes paid), the IRS is already going to have proof of that stuff from your employer or banking company, so it's pretty straight forward. What people get in trouble with are the next sections: Charities, Theft Losses, Job Expenses & Misc Deductions. Don't claim you donate half your salary. Don't declare half your house office space for your job. Don't say you're consistently robbed of your priceless art collection, especially without a police report and insurance claim!
Someone who plays by the rules will be fine. And even if they do want to audit you, they're not going to pry your teeth out looking for every penny in most cases. They're generally going to want some additional documentation. And in most cases, they're already aware of what you should be paying. Generally they just send out a simple letter basically saying "Hey, we noticed you forget to pay something. Send a check for this amount (plus a few bucks interest) by such and such date. If you don't believe you owe that, let us know or give us a call". Honestly, even if you forgot you had to pay something and you send in the payment, the IRS is happy. I've gotten several letters over the years. In some instances, I forgot to pay something. In other instances, I've made the payment, but forgot the paperwork to tell the IRS how to apply the payment! And for anyone like you or me, they're not going to send us to jail for the money we're talking about. You'll need to get into some serious fraud to have them start looking into stuff like that!
Quote from: vdeane on September 19, 2016, 01:22:18 PM
Not sure where this whole idea of writing off interest on taxes came from. No amount of tax deductions will equal or surpass the total amount of money you're paying in interest. Plus it's generally best to just take the standard deduction anyways. Unless you have a ton of deductions, itemizing them just leads to headaches, a larger tax bill, and a random chance of an audit.
I'm pretty sure that you're permitted to take a deduction for student loan interest when calculating your adjusted gross income regardless of whether you're itemizing or taking a standard deduction.
i.e. you can take both the standard deduction AND a student loan interest deduction. The standard deduction only replaces itemized deductions which are listed on schedule A, not those which are listed on lines 23-35 on your 1040.
You can only deduct that part of union dues that exceeds 2% of your adjusted gross. I guess there are some union jobs with dues that high, but not many. And most of them are probably low enough pay that they don't make enough to itemize anyway.
Quote from: Duke87 on September 19, 2016, 07:16:15 PM
Quote from: vdeane on September 19, 2016, 01:22:18 PM
Not sure where this whole idea of writing off interest on taxes came from. No amount of tax deductions will equal or surpass the total amount of money you're paying in interest. Plus it's generally best to just take the standard deduction anyways. Unless you have a ton of deductions, itemizing them just leads to headaches, a larger tax bill, and a random chance of an audit.
I'm pretty sure that you're permitted to take a deduction for student loan interest when calculating your adjusted gross income regardless of whether you're itemizing or taking a standard deduction.
i.e. you can take both the standard deduction AND a student loan interest deduction. The standard deduction only replaces itemized deductions which are listed on schedule A, not those which are listed on lines 23-35 on your 1040.
Which is probably why I've never seen it... I use 1040EZ instead of 1040 or 1040A. On the plus side, it only takes me 30 minutes combined to do my federal and state income taxes (not including time spent waiting for the IRS to accept my federal return before I start the state return) (also, the fact that the online system for federal doesn't even do simple things like look up your tax amount, unlike the state system, which consists of entering in some boxes from my federal return and my W2 and checking a few boxes; the rest is automatic).
The student loan interest is deductible on the 1040A. The deduction is capped at a fairly low amount and it phases out as your income increases. My point was simply–if you must carry debt, at least that particular debt may have some tax benefit.
It makes me think of a tax referendum that's on the ballot in Fairfax County this fall. The county wants to enact a meals tax "to reduce reliance on the real estate tax." But the real estate tax is deductible on the federal return. The meals tax wouldn't be. If I have to pay a tax, I'd just as soon it be the deductible one (recognizing I could avoid the meals tax easily enough by not eating out, and even if I did eat out it'd likely be a small amount over the course of a year.....in other words, all things are never equal).
Quote from: kkt on September 20, 2016, 01:28:33 AM
You can only deduct that part of union dues that exceeds 2% of your adjusted gross. I guess there are some union jobs with dues that high, but not many. And most of them are probably low enough pay that they don't make enough to itemize anyway.
As part of the 2%, you can add up all of the below, which includes Union dues. Union dues better not be anywhere close to the 2% floor on their own, but combined with other items, may help you get above it. Sure, it may be a little work to determine if you qualify, but in the interest of paying fewer taxes (or getting a refund), it helps to be aware of the deduction possibilities.
-Business bad debt of an employee.
-Business liability insurance premiums.
-Damages paid to a former employer for breach of an employment contract.
-Depreciation on a computer your employer requires you to use in your work.
-Dues to a chamber of commerce if membership helps you do your job.
-Dues to professional societies.
-Educator expenses.
-Home office or part of your home used regularly and exclusively in your work.
-Job search expenses in your present occupation.
-Laboratory breakage fees.
-Legal fees related to your job.
-Licenses and regulatory fees.
-Malpractice insurance premiums.
-Medical examinations required by an employer.
-Occupational taxes.
-Passport for a business trip.
-Repayment of an income aid payment received under an employer's plan.
-Research expenses of a college professor.
-Rural mail carriers' vehicle expenses.
-Subscriptions to professional journals and trade magazines related to your work.
-Tools and supplies used in your work.
-Travel, transportation, meals, entertainment, gifts, and local lodging related to your work.
-Union dues and expenses.
-Work clothes and uniforms if required and not suitable for everyday use.
-Work-related education.
Eh, I'm unionized. Pretty sure my dues don't add up to 2% of my gross.
Quote from: vdeane on September 20, 2016, 01:18:54 PM
Quote from: Duke87 on September 19, 2016, 07:16:15 PM
Quote from: vdeane on September 19, 2016, 01:22:18 PM
Not sure where this whole idea of writing off interest on taxes came from. No amount of tax deductions will equal or surpass the total amount of money you're paying in interest. Plus it's generally best to just take the standard deduction anyways. Unless you have a ton of deductions, itemizing them just leads to headaches, a larger tax bill, and a random chance of an audit.
I'm pretty sure that you're permitted to take a deduction for student loan interest when calculating your adjusted gross income regardless of whether you're itemizing or taking a standard deduction.
i.e. you can take both the standard deduction AND a student loan interest deduction. The standard deduction only replaces itemized deductions which are listed on schedule A, not those which are listed on lines 23-35 on your 1040.
Which is probably why I've never seen it... I use 1040EZ instead of 1040 or 1040A. On the plus side, it only takes me 30 minutes combined to do my federal and state income taxes (not including time spent waiting for the IRS to accept my federal return before I start the state return) (also, the fact that the online system for federal doesn't even do simple things like look up your tax amount, unlike the state system, which consists of entering in some boxes from my federal return and my W2 and checking a few boxes; the rest is automatic).
O.o
I'm really surprised you aren't using at least a 1040A.
I also don't believe union dues exceed 2% of my gross and other expenses are reimbursed, thus making them ineligible for deduction, of course.
Quote from: jeffandnicole on September 20, 2016, 02:14:08 PM
Quote from: kkt on September 20, 2016, 01:28:33 AM
You can only deduct that part of union dues that exceeds 2% of your adjusted gross. I guess there are some union jobs with dues that high, but not many. And most of them are probably low enough pay that they don't make enough to itemize anyway.
As part of the 2%, you can add up all of the below, which includes Union dues. Union dues better not be anywhere close to the 2% floor on their own, but combined with other items, may help you get above it. Sure, it may be a little work to determine if you qualify, but in the interest of paying fewer taxes (or getting a refund), it helps to be aware of the deduction possibilities.
-Business bad debt of an employee.
-Business liability insurance premiums.
-Damages paid to a former employer for breach of an employment contract.
-Depreciation on a computer your employer requires you to use in your work.
-Dues to a chamber of commerce if membership helps you do your job.
-Dues to professional societies.
-Educator expenses.
-Home office or part of your home used regularly and exclusively in your work.
-Job search expenses in your present occupation.
-Laboratory breakage fees.
-Legal fees related to your job.
-Licenses and regulatory fees.
-Malpractice insurance premiums.
-Medical examinations required by an employer.
-Occupational taxes.
-Passport for a business trip.
-Repayment of an income aid payment received under an employer's plan.
-Research expenses of a college professor.
-Rural mail carriers' vehicle expenses.
-Subscriptions to professional journals and trade magazines related to your work.
-Tools and supplies used in your work.
-Travel, transportation, meals, entertainment, gifts, and local lodging related to your work.
-Union dues and expenses.
-Work clothes and uniforms if required and not suitable for everyday use.
-Work-related education.
Point taken. However, for union dues in particular, it's a pretty unusual union member who would need to carry malpractice insurance or have a home office for work purposes. I guess I've heard of some colleges where adjunct faculty have unionized, so it could happen.
Quote from: Rothman on September 20, 2016, 02:19:09 PM
Eh, I'm unionized. Pretty sure my dues don't add up to 2% of my gross. Quote from: vdeane on September 20, 2016, 01:18:54 PM
Quote from: Duke87 on September 19, 2016, 07:16:15 PM
Quote from: vdeane on September 19, 2016, 01:22:18 PM
Not sure where this whole idea of writing off interest on taxes came from. No amount of tax deductions will equal or surpass the total amount of money you're paying in interest. Plus it's generally best to just take the standard deduction anyways. Unless you have a ton of deductions, itemizing them just leads to headaches, a larger tax bill, and a random chance of an audit.
I'm pretty sure that you're permitted to take a deduction for student loan interest when calculating your adjusted gross income regardless of whether you're itemizing or taking a standard deduction.
i.e. you can take both the standard deduction AND a student loan interest deduction. The standard deduction only replaces itemized deductions which are listed on schedule A, not those which are listed on lines 23-35 on your 1040.
Which is probably why I've never seen it... I use 1040EZ instead of 1040 or 1040A. On the plus side, it only takes me 30 minutes combined to do my federal and state income taxes (not including time spent waiting for the IRS to accept my federal return before I start the state return) (also, the fact that the online system for federal doesn't even do simple things like look up your tax amount, unlike the state system, which consists of entering in some boxes from my federal return and my W2 and checking a few boxes; the rest is automatic).
O.o
I'm really surprised you aren't using at least a 1040A.
I also don't believe union dues exceed 2% of my gross and other expenses are reimbursed, thus making them ineligible for deduction, of course.
Let's put it this way: I had never heard of deductions other than the standard one and itemizing until this thread, and my personal finance/careers elective in high school didn't cover any forms other than 1040EZ and the NY state return in depth. I do my own taxes, on my own with the free fillable forms, since I believe that it is morally repugnant that someone should have to pay a tax preparer or for tax software for something that shouldn't be nearly as complicated as it is (most of the complications arising from the tax preparation industry lobbying congress to keep things complex and ban the IRS from making their own software, which is why the documentation and calculation capabilities of free fillable forms is atrocious). I try to keep everything as simple as possible.
Quote from: vdeane on September 18, 2016, 08:03:48 PM
There's definitely truth to the idea of the loan holding you back. I have a student loan that amounts to $315/month (though I actually pay $400/month since I don't want to wait eight more years to get rid of what amounts to my biggest single expense after rent). Because of that loan, I was not able to afford to buy my car outright and was forced to lease it instead (which is quite inconvenient; I'm sick and tired of tracking my mileage). Next year, when I would have had a car loan paid off, I'll instead be spending a large chunk of my savings (which is supposed to act as my emergency fund, which also isn't growing as fast as it could because of my student loan payments) as a down payment on another loan to buy out my car lease. I'm also living in constant fear of increases in rent and health costs (and with a 50% hike in premiums and copays rumored for the next union contract, I'm definitely worried; Cuomo will NOT back down). Hard to save as much for retirement as I should too; hope NY's pension plan doesn't get taken away at any point in the next 40 years!
We are still paying off student loans from one semester of college my wife took in 2000. Having just blown a red light and T-boned a vehicle yesterday morning, I am now facing a distinct possibility that my insurance company will consider the front end damage a total loss and will offer to trade it for a "comparable" vehicle, which is certainly not going to fit my criteria for "comparable." I hunted for the model I bought and drove to Tennessee to buy it. At any rate, we'll need to pay the deductible, my traffic ticket, a likely higher monthly insurance rate, and then start planning for eventually trading in whatever car we end up with for what we actually need/want. Without having to make student loan payments every month, we would have a large security net in the bank to cover all this. As it is, we do not. And it's a loan to pay off something that does us zero good. My wife has no title to show for the classes she took; all they did is make us have to pay more money.
I was fortunate enough to have 80% of my tuition paid for in grants and scholarships. I slacked off in college and flunked out, but at least I didn't incur debt in the process. I did eventually crawl my way part-time through community college, but the Associates degree I ended up with is not worth anything more than a high school diploma in the real world.
Quote from: vdeane on September 20, 2016, 05:47:37 PM
Let's put it this way: I had never heard of deductions other than the standard one and itemizing until this thread, and my personal finance/careers elective in high school didn't cover any forms other than 1040EZ and the NY state return in depth. I do my own taxes, on my own with the free fillable forms, since I believe that it is morally repugnant that someone should have to pay a tax preparer or for tax software for something that shouldn't be nearly as complicated as it is (most of the complications arising from the tax preparation industry lobbying congress to keep things complex and ban the IRS from making their own software, which is why the documentation and calculation capabilities of free fillable forms is atrocious). I try to keep everything as simple as possible.
You're right, unfortunately I have to pay taxes in this world where at some point the money saved in using a preparer who knows what she's doing is too much to ignore.
Quote from: vdeane on September 20, 2016, 05:47:37 PM
Let's put it this way: I had never heard of deductions other than the standard one and itemizing until this thread, and my personal finance/careers elective in high school didn't cover any forms other than 1040EZ and the NY state return in depth. I do my own taxes, on my own with the free fillable forms, since I believe that it is morally repugnant that someone should have to pay a tax preparer or for tax software for something that shouldn't be nearly as complicated as it is (most of the complications arising from the tax preparation industry lobbying congress to keep things complex and ban the IRS from making their own software, which is why the documentation and calculation capabilities of free fillable forms is atrocious). I try to keep everything as simple as possible.
Assuming your finances themselves have not gotten more complicated, filing a 1040A or 1040 won't take too much longer than a 1040EZ - you'll just end up writing "0" on most of the extra lines. That student loan interest credit will be worth it.
If your only deduction is the student loan interest, the 1040A ought to be pretty simple for you. Your lender should send you a form each year stating the interest you paid. Just read the 1040A directions as to the limitation on how much interest you can deduct since there is a cap. If you stick with the EZ, you're giving away money.
Regarding tax software....since I itemize, the way I see it is that the cost of the software is far outweighed by the benefit of ensuring I get the deductions correct. (State and local taxes can be deducted on the federal return. So between mortgage interest, state income tax, real estate tax, and car tax, it's very easy to see the benefit.) Since you don't own real estate, your situation obviously differs. BTW....if you have enough miscellaneous deductions (we don't), the tax software or accountant expense is also deductible. It's tough for most people to qualify for that.
Quote from: vdeane on September 20, 2016, 05:47:37 PM
Quote from: Rothman on September 20, 2016, 02:19:09 PM
Eh, I'm unionized. Pretty sure my dues don't add up to 2% of my gross. Quote from: vdeane on September 20, 2016, 01:18:54 PM
Quote from: Duke87 on September 19, 2016, 07:16:15 PM
Quote from: vdeane on September 19, 2016, 01:22:18 PM
Not sure where this whole idea of writing off interest on taxes came from. No amount of tax deductions will equal or surpass the total amount of money you're paying in interest. Plus it's generally best to just take the standard deduction anyways. Unless you have a ton of deductions, itemizing them just leads to headaches, a larger tax bill, and a random chance of an audit.
I'm pretty sure that you're permitted to take a deduction for student loan interest when calculating your adjusted gross income regardless of whether you're itemizing or taking a standard deduction.
i.e. you can take both the standard deduction AND a student loan interest deduction. The standard deduction only replaces itemized deductions which are listed on schedule A, not those which are listed on lines 23-35 on your 1040.
Which is probably why I've never seen it... I use 1040EZ instead of 1040 or 1040A. On the plus side, it only takes me 30 minutes combined to do my federal and state income taxes (not including time spent waiting for the IRS to accept my federal return before I start the state return) (also, the fact that the online system for federal doesn't even do simple things like look up your tax amount, unlike the state system, which consists of entering in some boxes from my federal return and my W2 and checking a few boxes; the rest is automatic).
O.o
I'm really surprised you aren't using at least a 1040A.
I also don't believe union dues exceed 2% of my gross and other expenses are reimbursed, thus making them ineligible for deduction, of course.
Let's put it this way: I had never heard of deductions other than the standard one and itemizing until this thread, and my personal finance/careers elective in high school didn't cover any forms other than 1040EZ and the NY state return in depth. I do my own taxes, on my own with the free fillable forms, since I believe that it is morally repugnant that someone should have to pay a tax preparer or for tax software for something that shouldn't be nearly as complicated as it is (most of the complications arising from the tax preparation industry lobbying congress to keep things complex and ban the IRS from making their own software, which is why the documentation and calculation capabilities of free fillable forms is atrocious). I try to keep everything as simple as possible.
One of the big problems with high schools (and this has been going on well before Common Core and other standardized testing) is that they don't really prepare you for everyday life. They'll love to have you figure out what A=B+C
2 for years on end, but in the end 1+1=2 & 3-2=1 is really what you need to know.
I'm surprised they even taught you the 1040EZ, honestly. I don't think I was taught that in my school. We had a finance class, along with DECA, but I don't remember taxes being part of that.
I'm an accountant in my day-to-day life. And I absolutely hate taxes. I don't do my own taxes. There's just too many tax law changes to worry about every year. I can give my stuff to my tax preparer, and in a half hour have everything kicked back to me, completed. If I have any questions, she has the answers. If I need advice, she had the advice.
While I don't know your entire situation, chances are you will do well with a 1040A. And your stuff should be simple enough that it's worth a visit to H&R Block. Sometimes, they advertise that if you come in to get your taxes done, you can bring in previous year's tax returns to look them over for free. If you haven't been deducting that student interest loan you've been paying, that's the perfect time to do that. You can go back 3 years. So, next spring when you get your 2016 taxes done, have them review your 2013, 14 & 15 tax stuff (I'm not sure if 2013 will be accepted, but 2014 & 15 definitely will be). If you bring in supporting documentation showing you didn't claim your interest, they can file an amended return to get your money back. I know you mentioned the worry about audits. Don't. While it's true that filing an amended return can raise some eyebrows, your return is simple enough that it's very clear why you're refilling. Like I said, the IRS is already aware of the interest you are due back, because the loan company probably submitted that as part of their records to the IRS. The IRS is simply waiting for you to tell them you want your deduction. It'll be nice if they gave that back to you up front, but that'll never happen!. Those that are filing amended returns because they suddenly found another $10,000 in business receipts for golf outings are the people that need to worry about audits!
Quote from: vdeane on September 20, 2016, 05:47:37 PM
Quote from: Rothman on September 20, 2016, 02:19:09 PM
Eh, I'm unionized. Pretty sure my dues don't add up to 2% of my gross. Quote from: vdeane on September 20, 2016, 01:18:54 PM
Quote from: Duke87 on September 19, 2016, 07:16:15 PM
Quote from: vdeane on September 19, 2016, 01:22:18 PM
Not sure where this whole idea of writing off interest on taxes came from. No amount of tax deductions will equal or surpass the total amount of money you're paying in interest. Plus it's generally best to just take the standard deduction anyways. Unless you have a ton of deductions, itemizing them just leads to headaches, a larger tax bill, and a random chance of an audit.
I'm pretty sure that you're permitted to take a deduction for student loan interest when calculating your adjusted gross income regardless of whether you're itemizing or taking a standard deduction.
i.e. you can take both the standard deduction AND a student loan interest deduction. The standard deduction only replaces itemized deductions which are listed on schedule A, not those which are listed on lines 23-35 on your 1040.
Which is probably why I've never seen it... I use 1040EZ instead of 1040 or 1040A. On the plus side, it only takes me 30 minutes combined to do my federal and state income taxes (not including time spent waiting for the IRS to accept my federal return before I start the state return) (also, the fact that the online system for federal doesn't even do simple things like look up your tax amount, unlike the state system, which consists of entering in some boxes from my federal return and my W2 and checking a few boxes; the rest is automatic).
O.o
I'm really surprised you aren't using at least a 1040A.
I also don't believe union dues exceed 2% of my gross and other expenses are reimbursed, thus making them ineligible for deduction, of course.
Let's put it this way: I had never heard of deductions other than the standard one and itemizing until this thread, and my personal finance/careers elective in high school didn't cover any forms other than 1040EZ and the NY state return in depth. I do my own taxes, on my own with the free fillable forms, since I believe that it is morally repugnant that someone should have to pay a tax preparer or for tax software for something that shouldn't be nearly as complicated as it is (most of the complications arising from the tax preparation industry lobbying congress to keep things complex and ban the IRS from making their own software, which is why the documentation and calculation capabilities of free fillable forms is atrocious). I try to keep everything as simple as possible.
Depending on the deductions that you're eligible for, the price you're paying for simplicity and principle may be quite considerable.
For example, because I have a mortgage, I'm eligible to deduct the interest I pay on it. I also make significant charity donations. If I took the standard deduction, I'd be paying literally thousands of dollars more in taxes that I'm not legally bound to do so.
Totally understand why one would hate to pay to fulfill a legal obligation like taxes, but the reality is that the tens of dollars spent on even some basic tax prep software can save you hundreds or even thousands...not to sound too much like a shill.
Quote from: jeffandnicole on September 21, 2016, 08:37:47 AM
Quote from: vdeane on September 20, 2016, 05:47:37 PM
Quote from: Rothman on September 20, 2016, 02:19:09 PM
Eh, I'm unionized. Pretty sure my dues don't add up to 2% of my gross. Quote from: vdeane on September 20, 2016, 01:18:54 PM
Quote from: Duke87 on September 19, 2016, 07:16:15 PM
Quote from: vdeane on September 19, 2016, 01:22:18 PM
Not sure where this whole idea of writing off interest on taxes came from. No amount of tax deductions will equal or surpass the total amount of money you're paying in interest. Plus it's generally best to just take the standard deduction anyways. Unless you have a ton of deductions, itemizing them just leads to headaches, a larger tax bill, and a random chance of an audit.
I'm pretty sure that you're permitted to take a deduction for student loan interest when calculating your adjusted gross income regardless of whether you're itemizing or taking a standard deduction.
i.e. you can take both the standard deduction AND a student loan interest deduction. The standard deduction only replaces itemized deductions which are listed on schedule A, not those which are listed on lines 23-35 on your 1040.
Which is probably why I've never seen it... I use 1040EZ instead of 1040 or 1040A. On the plus side, it only takes me 30 minutes combined to do my federal and state income taxes (not including time spent waiting for the IRS to accept my federal return before I start the state return) (also, the fact that the online system for federal doesn't even do simple things like look up your tax amount, unlike the state system, which consists of entering in some boxes from my federal return and my W2 and checking a few boxes; the rest is automatic).
O.o
I'm really surprised you aren't using at least a 1040A.
I also don't believe union dues exceed 2% of my gross and other expenses are reimbursed, thus making them ineligible for deduction, of course.
Let's put it this way: I had never heard of deductions other than the standard one and itemizing until this thread, and my personal finance/careers elective in high school didn't cover any forms other than 1040EZ and the NY state return in depth. I do my own taxes, on my own with the free fillable forms, since I believe that it is morally repugnant that someone should have to pay a tax preparer or for tax software for something that shouldn't be nearly as complicated as it is (most of the complications arising from the tax preparation industry lobbying congress to keep things complex and ban the IRS from making their own software, which is why the documentation and calculation capabilities of free fillable forms is atrocious). I try to keep everything as simple as possible.
One of the big problems with high schools (and this has been going on well before Common Core and other standardized testing) is that they don't really prepare you for everyday life. They'll love to have you figure out what A=B+C2 for years on end, but in the end 1+1=2 & 3-2=1 is really what you need to know.
I'm surprised they even taught you the 1040EZ, honestly. I don't think I was taught that in my school. We had a finance class, along with DECA, but I don't remember taxes being part of that.
I'm an accountant in my day-to-day life. And I absolutely hate taxes. I don't do my own taxes. There's just too many tax law changes to worry about every year. I can give my stuff to my tax preparer, and in a half hour have everything kicked back to me, completed. If I have any questions, she has the answers. If I need advice, she had the advice.
While I don't know your entire situation, chances are you will do well with a 1040A. And your stuff should be simple enough that it's worth a visit to H&R Block. Sometimes, they advertise that if you come in to get your taxes done, you can bring in previous year's tax returns to look them over for free. If you haven't been deducting that student interest loan you've been paying, that's the perfect time to do that. You can go back 3 years. So, next spring when you get your 2016 taxes done, have them review your 2013, 14 & 15 tax stuff (I'm not sure if 2013 will be accepted, but 2014 & 15 definitely will be). If you bring in supporting documentation showing you didn't claim your interest, they can file an amended return to get your money back. I know you mentioned the worry about audits. Don't. While it's true that filing an amended return can raise some eyebrows, your return is simple enough that it's very clear why you're refilling. Like I said, the IRS is already aware of the interest you are due back, because the loan company probably submitted that as part of their records to the IRS. The IRS is simply waiting for you to tell them you want your deduction. It'll be nice if they gave that back to you up front, but that'll never happen!. Those that are filing amended returns because they suddenly found another $10,000 in business receipts for golf outings are the people that need to worry about audits!
I don't think I paid enough interest to qualify in 2013, since my loans were in grace up until November/December. 2014 and 2015 would qualify (2015 is actually above the maximum, and I remember 2014 being a huge pain due to the health insurance mandate and me being unemployed much of the year). Trouble is, one can't re-file electronically, I have no idea how complicated a 1040X is (probably very), and I hate paper records.
Wish I had known about this sooner.
Incidentally, I run Linux exclusively, so no tax software for me even if I was interested in paying for it. In any case, it really stings that taxes can't be as simple here in the US as they are in the rest of the developed world. Why can't this country have nice things?
It's not a question of whether you have enough interest to "qualify"; it's more a question of whether you have enough in a given year to make it worth going back to amend. Student loan interest is what's sometimes called an "above-the-line deduction." (If you look at the 1040A, you'll see it goes on the front side of the form, while most other deductions go on the back.) Unlike the standard deduction or the itemized deductions, the student loan deduction is subtracted from your total income prior to determination of the adjusted gross income. There are various itemized deductions, such as medical expenses and the miscellaneous deductions I noted earlier, that you cannot take unless the deduction's amount exceeds a certain percentage of your adjusted gross income (I think for medical expenses it's 10% under current law). That requirement prevents a lot of people from claiming these deductions. The student loan interest deduction doesn't work that way. Even if you only pay, say, $150, you could still claim it. The student loan deduction is instead subject to two caps. You can only deduct up to a certain amount of interest per year (I think it's somewhere between $2,500 and $3,000, but I'm not positive) regardless of how much you paid, and once your gross income exceeds a certain dollar amount (I think it used to be $65,000; not sure what it is now) the amount of your deduction is gradually phased out so you only get a partial deduction, and then if you make more than a certain amount (I don't remember the number, but it's more than $100,000 and less than $175,000) you can't take this deduction. These are the sorts of things for which tax software is extremely helpful because the software will be able to determine for you whether you can take the deduction and, if so, how much you can take (recognizing your comment about Linux).
As I say, the real question if you had a very small amount of interest paid in a given year is whether going back and amending your return would reduce your adjusted gross income by enough to make it worth the trouble. That's something you'd have to work out on your own. But going forward, there's no reason not to claim the deduction, no matter how small it may be. It's not the sort of deduction that's likely to trigger an audit.
BTW–your lender only has to send you a statement if you pay more than $600 of interest, but you can still deduct it if you paid less than that amount. You'd just have to figure out the amount, typically either by logging into your online account or looking at your monthly statements and adding it up.
Here's 1040X: https://www.irs.gov/pub/irs-pdf/f1040x.pdf . Here's the instructions: https://www.irs.gov/pub/irs-pdf/i1040x.pdf
If this is too much to understand, give a tax preparation office a call. While it's a relatively slow time for them, they are doing stuff all the time. Right now, many offices are busy doing required audits of businesses with fiscal years ending June 30th. Also, those that filed for extensions (ironically, many CPAs do that because they're busy taking care of everyone else's tax returns) need to submit their forms by October 15.
If you filed on time and received a refund, since the time limit for filing an extension is 3 years from the due date, it doesn't matter if you file an amended 2014/15 1040X return today or early in April. So, don't worry about it right now. In January when you get your documents for this year, take a look at the updated 1040A for 2016, and compute your taxes with and without the Student Loan Interest. If you see a significant difference in what your refund (or payment) will be, it may not hurt to go back and see what the difference will be for 2014 & 2015.
If there's any CPA or tax friends up in your office, talk to them as well. I'm sure they'll give you a little free tax advice.
(Is this the time for the disclaimer that you should seek a qualified tax professional...LOL)
Would have thought it would have been more complicated. Isn't a base 1040 a zillion pages long or something?
Quote from: 1995hoo on September 21, 2016, 01:56:45 PM
Unlike the standard deduction or the itemized deductions, the student loan deduction is subtracted from your total income prior to determination of the adjusted gross income.
OK, so that's a potential complication... my NY income tax is computed from the federal adjusted gross income, so refiling 2014 and 2015 would cascade down to my state taxes.
The 1040 itself doesn't have a lot of pages. It's a two-page form. But most people who file it also file various supporting schedules and it's those that make it lengthy.
Quote from: 1995hoo on September 21, 2016, 09:43:37 PM
The 1040 itself doesn't have a lot of pages. It's a two-page form. But most people who file it also file various supporting schedules and it's those that make it lengthy.
Right, it's a 2-page form, with 500,000 pages of instructions :)