The library isn’t free
One of many things I was reminded of as part of becoming a home (mortgage) owner: The public library is not free! In fact, it is the 2nd largest line item on my property tax bill, beat out only by school programs! The monthly cost is 3x the cost of Netflix! (Of course, while public library is probably not the best value for ME personally, it benefits a lot of people. But it isn’t free.)
Also not free: The parks, firemen, paramedics, mosquito control ($2 year), and some other line items that appear to have been voted on by various measures over the years.
This year, I actually did some tax planning. The past few years, we’ve each just claimed 0 exemptions and crossed our fingers that we’d get a refund. This has failed two years in a row, so I decided that maybe it was a bad strategy. I’m a bit late to the game, but it was a weird year and any early calculations would have just been wrong anyway, so better late than never?
Here’s what I learned:
- Hey, we are due a federal refund. Wooo!
- For the first time ever… we will itemize!
- Aside from itemizing, our tax bill should be straightforward. No out of state pay, no confusing grad student stipend that doesn’t always align with tuition pay, nothing odd. We’ll see though.
- We’re saving in the ballpark of $5k due to itemizing, some of that due to paying property taxes and mortgage interest. But we actually would itemize this year anyway based on state taxes alone.
- On that note… WE ARE PAYING CALIFORNIA SO MUCH MONEY this year.
- We will definitely owe California money.
- Our net bill (federal & state) is likely about $4k, but I’m not sure.
- I’m not sure because my bonus amount has not been revealed, and I’m not 100% sure how they withhold taxes. Likely they withhold 40%, but we’ll see.
- We are probably going to owe the AMT this year. This was a surprise, as I kind of forgot the AMT existed. The impact will be $1k or so. Also, scratch that previous statement about simple taxes.
I also did some 2015 planning, because next year is more predictable. Here’s what I learned there.
- Owning a home will save us on the order of $11k. I get that this is because we are paying taxes and mortgage interest, but it makes a big difference when you are calculation the cost of ownership vs. the cost of renting.
- State taxes alone should no longer be enough to make us itemize. But we’ll itemize.
- I don’t think we’ll be hit with the AMT again.
- We’re definitely going to have our withholdings properly set up in 2015. We have avoided owing a penalty on our tax bill in the past due to the “is this more than you’ve owed in taxes, ever?” exception. I don’t think that will be available to us after 2014’s tax bills.
I feel a lot better knowing what is coming, and having the ability to plan for it. I’ll set aside the tax money next month. At that point, we can rest assured… knowing that all we have left is to spend an entire weekend struggling with the official tax forms, and sending the state of California a boatload of money.