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Money lately

December 12, 2014

First mortgage prepayment! I sent in my first mortgage prepayment this month!   It was $4,000, and it shortened our mortgage by 3 months and reduced the interest we’ll pay by nearly $6000.  Yay!   We most likely won’t do our next big prepayment until summer, so I’m going to have to make this excitement last.

Taxes I spent some time yesterday on tax optimization / planning for our 2014 tax bill.  We had a significant amount of one time income this year, so shifting tax burdens into 2015 could help a lot.

  • Idea #1:  Make sure the mortgage payment due hit 1/1/2015 is paid 12/31/14 so we can claim the interest in 2014.  This was a failure for uninteresting reasons.  T pointed out it wasn’t as though we were losing out on the deduction – we just had to wait until next year to get MOST of it (less, as our marginal rate will be lower next year.)
  • Idea #2:  Prepay the property tax bill due February 1st.  Since our tax bill is about $6,000, I thought this idea was BRILLIANT and was really excited about it for about 7 minutes.  However, my calculations show we’ll be hit for a small portion by the AMT, and property taxes aren’t deductible under the AMT.  All this tactic would do would be  increase the difference between our “regular” projected taxes and our taxes under the AMT.  Boo.
  • Realization:  T won’t get paid for December until 1/2 instead of 12/31 as I had assumed. This was completely predictable (payroll schedules), but I never thought to check.  This means FAIL at maxing out his retirement (although we still did set aside >$30k for him so I’m not too upset).  It also means we won’t have to pay taxes on that month of income.
  • Hope:  I can hope my last paycheck won’t be issued until the start of the year, but that is pretty unlikely. My 401k is already maxed, so there is no benefit to getting it in 2014.

Anyway, I didn’t really accomplish much with the above excercise, other than learning a bit more about the tax code. I expect we will still owe about $3k (to CA) come tax time. I have a spreadsheet that can estimate my tax liability, but doesn’t consider the AMT.  I found TurboTax’s free TaxCaster app/website to be really handy for doing these calculations.  I also plugged in our 2015 info (with the knowledge that the code will change slightly) to see how close we are to the AMT in a normal year.  The good news is, we won’t be close at all.

House The recent rain storm made us consider plans to improve the drainage at our house.  We knew it should be done eventually, but we finally got to see how well (or not) everything worked.  The house is fairly old, and did completely fine with no drainage for decades, so this isn’t a must.  The previous owners put in rudimentary drainage within the last few years.  We’ll get a quote, but we are hoping that we can pull this off as a DIY project.   T is amazingly meticulous, good at planning,  and good at fixing things.  And I know how to dig holes and stuff too.  I think. I mean, I’m willing to learn.

We also installed 2 bathroom vent fans!  No more showering with the windows open!   The project probably cost ~$400 in supplies (each fan was $100, then there was other stuff).  My dad did the wiring as a late birthday gift while they were visiting, and T did most of the other work.  We checked out the tools we needed (hole saw, industrial drill) from the library for FREE.  This is the best service I’ve every heard of a local library having (you know, aside from free books).  Because how often does one need a hole saw?  Not often enough to pay $50+ for one! The new furnace is also in, and we are waiting on a rebate for about $2000.

Our next furnishing plan will be in the office.  We need a bigger desk.  The desk in there is too small, and T is constantly working out at our dining room table.  This will likely wait until January, but I’m planning 8″ ikea countertop desk (or two 6″, mostly because they will fit in our car) + legs and probably a set of drawers.

How much money we need – update OK, I realized the numbers I shared yesterday are not accurate.  Since we rented for part of the year and then switched to a mortgage, I screwed up the estimations. I need to take longer than 15 minutes and redo the analysis.  Just FYI.  I’m going to wait 6 months to do this.  I just wanted to note that our post-mortgage spending will be more than whatever I claimed it would.

5 Comments leave one →
  1. December 12, 2014 11:14 am

    “just” 4K?

    • December 12, 2014 11:40 am

      I wanted to do more… it was from my bonus. But point taken!

  2. December 12, 2014 3:01 pm

    Yay! I remember how excited I was to make my first pre-payment 🙂

    My county doesn’t release the 2015 tax bills until February, so I can’t bunch my property tax deductions.

    I love that Ikea countertop desk idea! It looks pretty cool. We need to figure out the desk situation at some point…

  3. December 12, 2014 10:01 pm

    Since markets have dropped, can you sell any stocks for a loss and rebuy soon? I know some people do this but its a bit risky and I’ve never done it. I think you have to wait 30 days to rebuy.

    • December 15, 2014 10:09 am

      This is another good idea. Our investments are all in pretax retirement accounts for now, but the concept of tax harvesting sounds interesting.

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