Minor things that bother you

[Rothman]

Invariably, at a public gathering, there will be an announcement that phones should be set to silent or vibrate. And invariably, someone's phone will go off.

Most likely by someone that should have retired five years ago.

[kkt]

I, too, itemized up to a couple of years ago and no longer do.  I still contribute to charity, but I miss the deduction.  I bet a lot of charities are hurting now.

[Big John]

I, too, itemized up to a couple of years ago and no longer do.  I still contribute to charity, but I miss the deduction.  I bet a lot of charities are hurting now.

Why they want the $19 per month?

[kkt]

I, too, itemized up to a couple of years ago and no longer do.  I still contribute to charity, but I miss the deduction.  I bet a lot of charities are hurting now.

Why they want the $19 per month?

It adds up over millions of people who used to itemize and no longer do.

[GaryV]

I, too, itemized up to a couple of years ago and no longer do.  I still contribute to charity, but I miss the deduction.  I bet a lot of charities are hurting now.

Most people who no longer itemize are getting a better deal because the standard deduction is higher than their previous itemized list.

Exceptions: If you no longer itemize because you've lost a major item (mortgage interest, property tax, etc.) in recent years, then you aren't better off.

[Rothman]

No one is better off if they lose a big ability to deduct.

Very interesting how the new standard deduction/last administration tax act has played out.  My effective tax rate dropped by a whopping .2% -- note that decimal point.

You either had to be "upper lower class," where you were paying some high amount of taxes after whatever deduction you were able to take (thinking paycheck-to-paycheck renters) or be ridiculously rich to have truly noticed a benefit from it.

Then again, so many people have no idea how deductions work -- even the standard deduction -- despite filing taxes every year.  They just follow the steps and don't think about what's really behind the math...and the government bets on that kind of mentality.

"I got a bigger refund, so my taxes must have gone down..." -- ignores the insanity behind our withholding process...

[1995hoo]

I, too, itemized up to a couple of years ago and no longer do.  I still contribute to charity, but I miss the deduction.  I bet a lot of charities are hurting now.

Most people who no longer itemize are getting a better deal because the standard deduction is higher than their previous itemized list.

Exceptions: If you no longer itemize because you've lost a major item (mortgage interest, property tax, etc.) in recent years, then you aren't better off.

To some extent, those things go hand-in-hand. The limitation on deducting state and local taxes paid (in our case, that includes state income tax, real estate tax, and the "personal property tax" more popularly known as the "car tax") means that our itemized deductions would not exceed the amount of the standard deduction, so we no longer deduct mortgage interest either. Of course we still have to pay it, and we're also far enough along in the payment process that the mortgage interest is considerably less of a deduction than it was even just five years ago. Interestingly, you also have to consider marital status and various other factors. Someone who isn't married has a lower standard deduction than a married couple and thus might fairly easily come out ahead by itemizing.

I don't want to get political, but I sometimes wonder to what extent the various limitations that make itemizing less useful to the average taxpayer might have an unintended side effect of discouraging home ownership by reducing the availability of the tax benefits that were generally associated with buying instead of renting. Of course there are plenty of reasons other than taxes why someone might choose one route or the other.

[Rothman]

Heh.  People care about those big interest payments earlier in the mortgage than the smaller ones years down the road.

Makes me wonder if home owners become more politically conservative the later they get in their mortgage payments.

[jeffandnicole]

I, too, itemized up to a couple of years ago and no longer do.  I still contribute to charity, but I miss the deduction.  I bet a lot of charities are hurting now.

Most people who no longer itemize are getting a better deal because the standard deduction is higher than their previous itemized list.

Exceptions: If you no longer itemize because you've lost a major item (mortgage interest, property tax, etc.) in recent years, then you aren't better off.

You're still better off, especially if this was someone's sole reason to itemize. More of your payment is going to principal, giving you more equity on the house.

If you have a lot of other deductions in which mortgage interest aided the ability to itemize, it hurts somewhat. If someone had a lot of medical expenses, then there may be some benefit to having other deductions available, including mortgage interest.

But the people keeping their interest high just so they can itemize are really losing thousands per year. If they could deduct $12k via the standard deduction and their interest is $13k, they're only getting a $1,000 benefit out of that interest. Sure, they likely have other taxes and such they can deduct, but they likely aren't reaping the full value of that deduction they think they're getting.

I don't want to get political, but I sometimes wonder to what extent the various limitations that make itemizing less useful to the average taxpayer might have an unintended side effect of discouraging home ownership by reducing the availability of the tax benefits that were generally associated with buying instead of renting. Of course there are plenty of reasons other than taxes why someone might choose one route or the other.

Being that renting generally means 0% is deductible and 0% of the payments goes towards equity, people should strive to purchase rather than rent whenever feasible. There's going to be reasons why renting is better than buying, but the ability to no longer itemize interest payments shouldn't be as big of a factor as it's often made out to be.

[JayhawkCO]

"I got a bigger refund, so my taxes must have gone down..." -- ignores the insanity behind our withholding process...

What's a refund? I don't think I've gotten one in about 20 years.

[ZLoth]

I made my biggest payments on my mortgage at the beginning when I refinanced. However, because of the low fixed interest rate, I've been told NOT to pay off the house early, and to instead invest the money for a better return. But, because I have a small starting principal when I refinanced, my escrow payment for the homeowners insurance and property tax exceeds what I'm required to pay for principal and interest combined. I'm targeting payoff at the end of 2019.

I'm damn lucky and have good timing. While the value of my home has gone up around 45-48%, what I'm currently paying in my mortgage is slightly higher than several nearby two-bedroom apartments with less than half of the square footage of my home. I have gigabit Internet, and am on the same circuit as a nearby medical center and fire/police station, thus having a long (over one minute) power failure is extremely rare. And, because my fifteen year fixed interest rate is at 3.25%, I'm effectively "rate-locked" and have "golden handcuffs", so moving is out of the question. When I look at the Zillow map of my neighborhood, there are just four homes for sale and five home available to rent, and the closest equivalent to my home is almost double what I pay on my mortgage.

Of course, there are the neighbors. For four years, we had a nice if somewhat scatterbrained neighbor who was super nice to my mother and myself. She passed away a year ago yesterday (yes, on New Years Day), and her daughter has since moved into the home. She does not like us one bit, and even replaced the fence with at-code limit fence to block us out.

[tmoore952]

No one is better off if they lose a big ability to deduct.

Not true for me, at least for a couple years.

The $10000 cap on state and local tax deductions did affect me significantly, and caused me to pay more in taxes than it would if that hadn't changed, by making it harder for me to deduct more than the standard deduction. And that happened despite the fact that the standard deduction went up AND the tax rates went down (I determined this by computing my taxes in different ways, using the different rules). It was the primary reason I speeded up getting rid of the mortgage and its deduction. I had been trying to dance around all of this for (hopefully) obvious reasons (politics).

[tmoore952]

I'm targeting payoff at the end of 2019.

Typo, I assume?

[kkt]

"I got a bigger refund, so my taxes must have gone down..." -- ignores the insanity behind our withholding process...

What's a refund? I don't think I've gotten one in about 20 years.

As I understand it, if you owe you can be penalized even if you pay it by April 15.  How do you hit it so exactly that you have no refund and also no penalty for underwithholding?

[1995hoo]

"I got a bigger refund, so my taxes must have gone down..." -- ignores the insanity behind our withholding process...

What's a refund? I don't think I've gotten one in about 20 years.

As I understand it, if you owe you can be penalized even if you pay it by April 15.  How do you hit it so exactly that you have no refund and also no penalty for underwithholding?

Merely owing something is not enough to get you hit with a penalty.

[tmoore952]

"I got a bigger refund, so my taxes must have gone down..." -- ignores the insanity behind our withholding process...

What's a refund? I don't think I've gotten one in about 20 years.

As I understand it, if you owe you can be penalized even if you pay it by April 15.  How do you hit it so exactly that you have no refund and also no penalty for underwithholding?

You only get hit with a penalty for underwithholding if you owe more than a certain percentage of the total amount, or in some cases if you owe more than a certain dollar amount. And in many of those cases there are other rules that kick in that may void the fee, such as how much you paid the year before and how that compares to what you paid this year.

[kkt]

"I got a bigger refund, so my taxes must have gone down..." -- ignores the insanity behind our withholding process...

What's a refund? I don't think I've gotten one in about 20 years.

As I understand it, if you owe you can be penalized even if you pay it by April 15.  How do you hit it so exactly that you have no refund and also no penalty for underwithholding?

You only get hit with a penalty for underwithholding if you owe more than a certain percentage of the total amount, or in some cases if you owe more than a certain dollar amount. And in many of those cases there are other rules that kick in that may void the fee, such as how much you paid the year before and how that compares to what you paid this year.

Thank you.  Maybe I'll look into it more closely and reduce my withholding.

[tmoore952]

"I got a bigger refund, so my taxes must have gone down..." -- ignores the insanity behind our withholding process...

What's a refund? I don't think I've gotten one in about 20 years.

As I understand it, if you owe you can be penalized even if you pay it by April 15.  How do you hit it so exactly that you have no refund and also no penalty for underwithholding?

You only get hit with a penalty for underwithholding if you owe more than a certain percentage of the total amount, or in some cases if you owe more than a certain dollar amount. And in many of those cases there are other rules that kick in that may void the fee, such as how much you paid the year before and how that compares to what you paid this year.

Thank you.  Maybe I'll look into it more closely and reduce my withholding.

For Federal taxes, look at the part of the 1040 instructions in the area where payments/refunds are discussed. All of this is dicussed there.

I am not familiar with Washington State taxes, so apply this as appropriate.  In the MD tax booklet, this info is also in the area on payments/refunds.

I was just looking at this last week because I may have to make an estimated tax payment to MD to avoid having to pay a underwithholding penalty. I have until Jan 15 to do this in MD.

[CtrlAltDel]

"I got a bigger refund, so my taxes must have gone down..." -- ignores the insanity behind our withholding process...

What's a refund? I don't think I've gotten one in about 20 years.

If you don't know what a refund is, how do you know you haven't gotten one? 

[kkt]

"I got a bigger refund, so my taxes must have gone down..." -- ignores the insanity behind our withholding process...

What's a refund? I don't think I've gotten one in about 20 years.

As I understand it, if you owe you can be penalized even if you pay it by April 15.  How do you hit it so exactly that you have no refund and also no penalty for underwithholding?

You only get hit with a penalty for underwithholding if you owe more than a certain percentage of the total amount, or in some cases if you owe more than a certain dollar amount. And in many of those cases there are other rules that kick in that may void the fee, such as how much you paid the year before and how that compares to what you paid this year.

Thank you.  Maybe I'll look into it more closely and reduce my withholding.

For Federal taxes, look at the part of the 1040 instructions in the area where payments/refunds are discussed. All of this is dicussed there.

I am not familiar with Washington State taxes, so apply this as appropriate.  In the MD tax booklet, this info is also in the area on payments/refunds.

I was just looking at this last week because I may have to make an estimated tax payment to MD to avoid having to pay a underwithholding penalty. I have until Jan 15 to do this in MD.

No personal income tax for Washington State.  (But don't get too jealous, we get high property taxes, high sales taxes, and so-so public schools...)

[JayhawkCO]

"I got a bigger refund, so my taxes must have gone down..." -- ignores the insanity behind our withholding process...

What's a refund? I don't think I've gotten one in about 20 years.

As I understand it, if you owe you can be penalized even if you pay it by April 15.  How do you hit it so exactly that you have no refund and also no penalty for underwithholding?

I pay the penalty. I think last year it was $7.

[ZLoth]

No personal income tax for Washington State.  (But don't get too jealous, we get high property taxes, high sales taxes, and so-so public schools...)

No personal income tax in Texas, but that is also offset by higher property taxes, and the local sales tax is 8.25% (6.25% state, 1% city, 1% DART).

[Rothman]

No one is better off if they lose a big ability to deduct.

Not true for me, at least for a couple years.

The $10000 cap on state and local tax deductions did affect me significantly, and caused me to pay more in taxes than it would if that hadn't changed, by making it harder for me to deduct more than the standard deduction. And that happened despite the fact that the standard deduction went up AND the tax rates went down (I determined this by computing my taxes in different ways, using the different rules). It was the primary reason I speeded up getting rid of the mortgage and its deduction. I had been trying to dance around all of this for (hopefully) obvious reasons (politics).

Like I said, no one's better off.

[kkt]

No personal income tax for Washington State.  (But don't get too jealous, we get high property taxes, high sales taxes, and so-so public schools...)

No personal income tax in Texas, but that is also offset by higher property taxes, and the local sales tax is 8.25% (6.25% state, 1% city, 1% DART).

10.25% here.

[kkt]

An income tax refund is just the government repaying an interest-free loan that you made to them, it is best for you to owe them a small amount at income tax time.  You are servicing gobs and gobs of endless debt "but just look at my income tax deduction!".

On one level that's certainly true, but there's not a whole lot of secure investments where you could put a few thousand, take it out early the next year, and earn enough interest for it to be worth while.

For me, if I file my tax return promptly, I get the refund just in time to pay the first installment of my property tax, so it all works out nicely.