Well it is that time of year again. We did our taxes and in fact I finished them last night. Here is the good news: We made more money last year. YAY! The bad news is that we still owe the government money. But it is certainly not as bad as last year. I called it downright mess.
To recap last year we owed the government over $4500 in taxes. Part of the reason for this is because of the way that they calculated taxes on our income. First, prior to 2015 if I taught extra courses they would actually provide me a separate paycheck, which lowered the taxes taken out. In April of 2015 they remedied that and they actually started including all of the income on one paycheck. This is great, in one sense, because it increased the amount of taxes I paid. At the same time I lost about $200-$300 in disposable income. This year I actually contributed more than $2500 more in taxes.
The second reason is that Mrs. ROB works for two different institutions (three in 2014). Because she teaches at different places each job taxes her separately instead of combining her income all at once. This creates less taxes taken from her accounts.
Third, we didn’t have much in the way of deductions for mortgage interest and real estate taxes compared to this year.
So when you combine all of that stuff together we owed the government quite a bit of money. After our state return it was a net tax loss of over $3500. I ended up taking out my contributions to my Roth IRA to partially pay the tax bill.
So for our tax situation this year we actually will only owe about $1000 to the government after everything. The primary reason for our better tax fortunes is that I contributed more in taxes than I did last year. After was all said and done our deductions were about the same, we increased them by about $1000, but the big winner was we paid more in taxes in 2015 than in 2014. We paid actually over $4000 more. Because of that our tax bill went down.
I am not happy about owing money to the government, but $1000 is a lot easier to deal with than $3500. I also increased my retirement contributions by about $5000. I hope to raise it even more in 2016.
Future Tax Plans
We still face a future where we might continue to owe the government. This is particularly true because in the future I can see us continuing to owe some money. I mean eventually the mortgage interest deduction for the house will go down. Our student loan interest, hopefully, will go down, etc, plus we will make more money. I hope.
My plan is for us to ramp up retirement contributions even more. Hopefully I can increase mine at my position, open up a regular IRA for Mrs. ROB, and generally deny Uncle Sam some more taxes.
I actually don’t mind paying taxes, but I want to get to a point where we are equal. No more out of pocket tax bills.