It's been a whirlwind of a year! In the last couple weeks, I've been starting to panic, wondering if I actually figured our tax situation out for 2018 in light of the new tax laws. I vaguely remembering need to wait to figure things out. But did I ever go back and review?
Yesterday, I hopped on the IRS Withholding Calculator to see where things stood. Luckily, at least in my mind, we are good. We will owe money but it should not be more than $540. I had increased our withholding which meant $90 more in our pocket each month, or by the time it took effect in February, $990 more for the year.
The calculations only took into account the American Opportunity Tax Credit I plan to take for our oldest daughter (for the final time, as it can only be used for four years). I did not take into account any credits for our youngest daughter. Because she only attended one semester in 2018, I plan to take the Lifetime Earning Credits on her qualified tuition, which should give us at least a credit of $300+ for the semester. That brings the tax owed around $240.
It is possible we will have a little more income added and more tax, but that's not looking too promising at the moment. I expect that anything that occurs is something we can handle. I have always preferred owing a few hundred dollars rather than have the IRS hold our money for many months before getting a refund. I've managed to make this work several years in a row now!
Have you reviewed your tax withholding and how that may affect if you owe the IRS or will get a refund? April 15th is just four months away. It's good to be prepared. The IRS Withholding Calculator is here.
Viewing the 'Taxes' Category
It's been a whirlwind of a year! In the last couple weeks, I've been starting to panic, wondering if I actually figured our tax situation out for 2018 in light of the new tax laws. I vaguely remembering need to wait to figure things out. But did I ever go back and review?
The new IRS Withholding Calculator is now available. You can find it here. I have yet to double check ours, but I know a few of you JUST updated your withholding allowances. So check again!
It is important to check for your current paychecks and filing for next year since the tax laws have changed for 2018. I personally like to try to get as close as possible to what I will actually owe at tax time. In fact, I don't mind paying as long as I'm not off by more than a few hundred dollars. This year we owe $91, which I set up for payment tomorrow.
Let me know...did you have to adjust your withholding allowances for the new tax law?
So finally, after many issues last month, I was able to log on to the free version of H&R Block to file our taxes. We are able to file free as military members through the Military One Source website. The filing was free for Federal and State. We owe $91 to the federal government, which is better than the expected $400 I had in mind. And we are exempt from state income tax in our state of legal residence, since they do not tax Active Duty Pay. I have already schedule payment from our checking account to take place on March 1st. I could have waited longer obviously, but I just want to get it done!
I think for now I will keep our withholding allowances at 9. Dido made me aware that there will be a $500 credit per dependent over age 17 beginning in 2018, so that reduces the tax owed by $1000. I may actually increase it later in the year, but I will wait until we know what the actual college expenses we pay are. Right now it could be as much as a $2500 American Opportunity tax credit and maybe $400 Lifetime Learning Credit. As it stands now, we will have $3918 withheld for 2018, and likely actual tax would be $6900. So we are in the right place with withholding.
And I can see that our next paycheck is higher due to the new withholding tables. The amount is $45.70 more per pay period or $91.40 per month. We were already getting an additional $63.15 per pay period due to my husband's raise. So since December we have $217 more in our pockets each month. And more going to retirement because of the raise! Can't complain about that.
In other news, I sold three more items on eBay in the last week. Not big money, but it all adds up. It goes to the Big Goal...as should that extra income above.
I have calculated the new withholding amounts we expect to see on my husband's paychecks going forward after the new tax law was passed. I used paycheckcity.com to do the calculations. We currently withhold 9 exemptions every pay period. That means the withholding in the past for us has been $409 per month. The new amount based on the same withholding will be $319 per month. An $80 difference, or $960 a year.
Sounds great right? Well, if I'm understanding the new tax laws for no personal exemptions, but higher standard deduction for married couples, and lower tax brackets, we will definitely have lower taxes, but the withholding we are currently at will be deficient by $400, and maybe more if we cannot take the full American Opportunity Credit for college expenses in 2018. I don't mind owing, but I'm now working to decided if I want to change our withholding to 8, or even add more to retirement to offset income.
I will get it figured out. I know how to do it all, I just need more time to decide what we want to do. Sending more to retirement when we already invest 18% and expect a pension equal to half my husband's pay is starting to seem like overkill. Again, just decisions to be made. I also need to figure how much we may actually pay in college costs out of pocket this year.
Oh, and a note slightly related to figuring taxes. When you claim the American Opportunity Tax credit you can only do it for four years per child. So if you claim it their first semester of their freshman year, that is one tax year. Therefore, once you get to spring semester of their senior year, you are into a fifth tax year...which you cannot claim. In our case, I did claim it for our oldest daughter for that first semester. Although, we didn't use the full amount, but my guess is as tuition increases through the year and our educational savings options run out we would benefit more in that final semester. I think there is still the Lifetime Learning Credit that can be taken indefinitely and combined even if you have another student still eligible for the AOTC. (There are income limits, so don't assume you are eligible based on the information I provide here. Do your own research for your specific situation)
I also have to remember that I can adjust withholding later in the year as we have more information...such as the amount we have actually paid out of pocket for college expenses that could be claimed.
Hmm...another thought I may actually take the Lifetime Learning Credit for my youngest this year, since it will be for just one semester. Then finish up using the American Opportunity Credit for our oldest daughter for 2018. The following year we could swap these. I think that could work. That would lower our taxes even more. I sure would rather the money go to pay tuition, than to the government who is overspending as it is with our tax dollars.
Have you done the calculations for your 2018 taxes? Did you have to change withholding? Will your taxes be less?
I went to FreeTaxUSA to work on filing our taxes since the free option we have as military members is currently not working. Ugh. Our taxes are pretty simple at this point. We no longer itemize since we do not own a home. In fact the last couple years we owned a home, our interest rate was so low in addition to taxes, itemizing was less than the standard deduction. So we took the standard deduction.
I have not filed our taxes yet, not sure if it is even open to do so. (I checked. The IRS begins accepting returns on January 29 this year.) But the final result is that we owe $91. This is really my perfect scenario. To owe just a little. I can come up with $91 any day of the week, so no big deal to figure out where the money owed will come from.
With FreeTaxUSA, federal filing is free. They do charge $12.95 for state filing. However, I'm pretty sure you can get that cut in half using a coupon code. I know Swagbucks is offering 50% off, or 50SB per dollar paid. Ebates is offer 25% cash back it looks like. So for a net of $6.50 I think it may be worth it to just file with them rather than spending time re-entering all the data. Sometimes the money spent is worth the time saved.
Somehow this year, taxes were even more simple than usual. We benefit with lower taxes due to saving in my husband's TSP, which are pretax contributions. We also took advantage of the American Opportunity Tax Credit this year. We spent $7,565 on qualified tuition and expenses. This does not include housing. Of course, only $4,000 of that amount is eligible for the AOC, which provided us with $1,500 tax credit and a $1000 refundable credit.
Next step is to start figuring out our tax scenario for 2018, so I can get close to even like I did this year.
Have you figured your taxes yet? Are yours complicated or more simple?
I personally did no spending today. I stayed home and sewed a lanyard for my sister who is a kindergarten teacher. This is her birthday gift. I made it from what I already had on hand in my sewing stash. I will need to mail it to her but I expect that to be only a couple dollars.
My husband received a $10 gift card from AutoZone in the mail today. He purchased new headlights for his truck that had a $10 rebate, thus the gift card. He went to AutoZone to use it for new map lights, which he thinks now wasn't a need but a wiring issue that has come loose. He attempted to get me a battery for my truck key fob, but they didn't have it. Oh, actually he also said he may have stripped the screw that holds the key fob together so we may not even be able to get a battery in it. At least the key still works!
I have some tax documents coming in including my husband's W2. I planned to use whatever the software the military has available, however, the site we need to go through Military One Source is having issues. I'm not able to log in. It seems others are having similar issues. I hope it is corrected soon. I probably could go find another site to use to at least get an idea where we stand, pay or refund. I remember last year doing a projection and expect we may need to pay $400.
We earned $79.08 in interest during the month of January. I hope to see that bump up a little now that more ($15K) of our money is invested at 2%.
I withdrew $4,750 from our daughter's Educational Savings account. That money will be used to cover most of her housing costs for the semester. She has $4839 left in her account. This is in a interest bearing account, so she is earning a little money on it each month.
Since it is officially payday today, I can say that I initially allocated $814 towards tuition. But I also didn't fund all of our usual everyday spending categories in YNAB specifically clothing and entertainment. That means I have another $100 to add to the tuition pot, and finally I decided that the electric bill (that really big one of $315) can actually be paid on our next paycheck on February 15. With those funds, funds saved from last few paychecks, the money from the ESA, and our tax refund, I am now only short $205.31!!
But as I'm writing this I'm also realizing that the books I bought my daughter for school have been allocated to that tuition category in YNAB. They were charged to my American Express card which I currently have 0% interest offer on. Therefore, I don't need to pay that off this pay period. That gives us another $153. Now I'm only short $48!!
I did realize that with my husband's travel reimbursement we might make a little money. It depends on how much he spends on food over what the per diem is. I think he will submit his request for reimbursement on Friday, and it should get paid within a week, maybe in time to pay the tuition bill! This would be a little less out of our savings that we would need to pay back.
I'm feeling much better about this huge tuition bill! I think I can likely shave $48 off our spending with some careful planning over the next 10 days.
I took our younger daughter back to Walmart yesterday to get more school supplies. ANOTHER binder, a 3 subject notebook, and dividers were required. We also bought a 4 pack of AAA batteries and a package of glue sticks to donate to two teachers. That was another $22. Why are office supplies so expensive? The 3 subject notebook was $4.24! The teacher did say they could use three regular notebooks, but my daughter did prefer the combined version for the easy of carrying around. I'm not going to make her sacrifice for a couple dollars.
I think we are continuing our version of frugal through mid February. That is when tuition is due, so I want to keep the spending to a minimum. My husband and I discussed greatly reducing our alcohol intake primarily for health reasons, but that would be very good on our budget. I will let you know how that works out.
I just ate leftover mushroom barley soup for lunch today. I pulled that out from the freezer. It was probably two servings, but I ate them both! So yummy and really not very caloric. I think I may be having soup all week, as I have a can of soup in the pantry and another soup in the freezer (Moroccan Lentil).
I will need to grocery shop today. I need apples and crackers for my daughter's lunch tomorrow. I made a list of other items to cover the rest of the week. I will buy today, but count the purchase as a February expense.
I checked our bank accounts this morning. The tax refund and my husband's paycheck are both pending for deposit tomorrow! I plan to redeem shares from my daughter's Educational Savings account tomorrow to cover a portion of the tuition bill. At this point we appear to be about $600 short of what we need. As I have said all along, I will use our regular savings to cover the shortfall and pay ourselves back. No loans for her or us this semester is the plan, and I'm sticking to it!
Oh, I saw this on the SA forum this morning. It's under freebies, but it is more about spreading kindness and love. Check it out if you are interested!
Our tax refund is scheduled to arrive in our bank account on Wednesday, February 1. I submitted them on Sunday, January 22. That is a pretty fast turn around! That $1497 refund is going straight to pay the tuition bill, which has been my plan all along.
I forgot to mention that I redeemed our Discover Rewards and had them deposited in our bank account this week. A whopping $3.37. I seem to earn the least amount of rewards from this card. We don't use it much, so I think I'm going to close it in my desire to keep things a bit simpler.
We are going to a matinee movie today. We are going to see Moana, which our daughter is interested in. We will pay $6 per person for admission. Afterwards we may stop for a quick dinner as our celebration of the first semester ending. It may just be Subway. I do have coupons there that expire tomorrow.
Tomorrow we will probably have fried rice for dinner. With tofu, which I have not made in years. Any advice for using it with fried rice? Do I just drain, cube it and add in?
I went ahead and filed our taxes. All of our tax forms arrived. We take the standard deduction, since we no longer own a home. This was probably one of the easiest tax filing years ever, honestly. We are getting a $1497 refund. All of which will go towards the tuition bill due February 12. And as I said in my last post, I did adjust withholding to avoid the big refund next year.
We went grocery shopping today. I honestly didn't use any coupons at the commissary, however I spent $102, which did include several wants. Overall, this is a very decent grocery bill for us. I did inquire about the items that we paid for last week, but were left behind. I had my receipt and they had recorded the items I left. I was simply told to go get the items and they would sack them up. It was almost too simple! At least $10+ worth of stuff was not lost.
The week after next my husband will be gone for about four or five days. I'm going to consider skipping my regular grocery shop and see if I can't get my daughter and I through that week without buying much at all. If I can do that I just might be able to save the $83 left in the grocery budget.
My husband was going to get a haircut today as he primarily needed his neck trimmed. He did mention that we should buy a new trimmer as we have been without one for awhile. He even pointed out the trimmer might cost the same amount as one haircut! Well, the one we bought was $24, and his haircut is usually $13. So one more trim and we will have made the purchase worthwhile. We also talked about cutting his hair at home. We did try that at one time, and I now can't remember why we didn't keep it up!
We have $323 left in our Everyday Expenses category for the rest of the month, just nine days. I feel pretty good that we can keep more than half, maybe even $200 of this money to send in towards tuition.
We were notified by my daughter's flute teacher that she needs to take the next four weeks off from teaching as she has a gig at the community playhouse. We do have the option of another teacher, but my daughter who has been packing in two AP courses in one semester (finals are this week, exam in May) just would like a break. This is going to save me $100! More money I can apply to tuition!!
I was considering changing our retirement vehicle from the Roth IRAs to Traditional to save on taxes. I was definitely procrastinating this decision and the calculations. My husband was agreeable either way. I finally realized it was a bit silly to invest in the Traditional considering we are in the 15% tax bracket. If we were to switch to Traditional we would save that money now, but it isn't that we would invest that savings, we would likely put it towards tuition or other college costs. I finally decided that the growth that would occur on the money invested in Traditional accounts would mean more taxes later. The Roth IRA is actually a really good deal!
I also decided to increase my husbands TSP to 11% of his basic pay. It had been 10% prior. This means an additional $992 saved for retirement. His raise was 2.1% so we put almost half away for later.
I mentioned in my last post that we are expecting nearly a $1500 refund. This means we effectively had too much withheld from my husbands paycheck. That is money we could have had in our hands all year long. I am pretty sure I planned it this way so that money could be put towards tuition this February. I'm not going to need to do that for 2017. I have changed our withholding from 8 to 9. Increasing the withholding number lowers the amount withheld from each paycheck. For us the change amounts to $90.99.
With these changes, my husbands paycheck will actually increase by about $50 a pay period or $100 a month. I think I need to put this extra in a specific budget category. Tuition seems like a good place! Or vacation.
I was looking for our interest statement on Navy Federal Credit Union's website yesterday. I couldn't find it, or last years. Turns out they mail it to you, and it arrived in our mailbox yesterday afternoon. My husband's W2 was also available on the MyPay website, so that meant I could start working on our taxes! I am still waiting for one more interest form, but I do know the amount. It looks like we will get a $1497 refund. We couldn't quite claim the full American Opportunity tax credit, but we were very close, having spent $3813 in qualified expenses out of pocket in 2016. I do prefer to have a smaller refund, but I think I deliberately did this last year, knowing the refund could be used towards tuition in February.
Tuition and housing bill was forwarded to me by my daughter last night. The total is $10,426, which includes $4662 for room and board. The rest is tuition, fees and books after her scholarship of $7250. She is taking 17 credit hours this semester, so that inflates the bill a bit. And remember she is an non resident student. I'll write more about tuition and paying the bill in another post.
Yesterday, I bought a few groceries and some junk food. I spent about $15 on six items. Three will be used for meals, but we also bought ice cream, cookies and a diet coke! Ugh. That isn't frugal in the least, and definitely not healthy. And it was all my idea to stop because I suggested ice cream to my daughter.
We are going to the matinee of Hidden Figures today. The admission will be $16.50 for the three of us. I expect my husband will get something at the concession stand. I have $40 allocated in our entertainment budget, anything we don't spend I'm putting towards that tuition bill! Every dollar counts.
Tonight we will have fried rice for dinner. I have peas to add, since I bought those for the tuna casserole I made a couple nights ago. Today we will probably just have leftover pizza, pasta and salad for lunch. There is a lot of salad to use up!
I might write more about this later, but there was discussion of annual credit card spending on the forums. Our annual credit card spending for 2016 was $49,384. I'm not sure I have ever looked at the annual amount before. I'm not sure if that is good or bad. It's good as it is less than half of our gross income. And we didn't pay any interest to use those cards for spending. I'm guessing it is slightly inflated, because it includes my daughter's Europe trip.
Have you started your taxes? Do you know what your annual credit card spending is? What are you having for dinner?
We love our Ooma and still like have the convenience of a landline at our house. Our cell service here has a lot to be desired. I get one or two bars and get more dropped calls then I would prefer! If you are interested the Ooma telo unit is on sale until the end of January and ships free. Our monthly fee of required Federal taxes is $4.83 a month. It does vary by location. I do get a referral credit if you sign up! So thank you in advance.
In other news, I started the transfer of $15K from one bank to the other. The money is going into that 2% CD that I opened yesterday with NFCU. It takes awhile to move...right now the estimated arrival is Monday!
I am in the process of switching some of our regular bills, such as the Ooma taxes, Netflix, cable, and our electric fee to the Southwest credit card. I want to consolidate as much of our spending as possible to one card to rack up the points. I need to try to remember tonight to tell the flute studio that I want to change my automatic payment with them, too.
I spent a little time this morning, get the the exact number than I can claim for tuitions, fees and related course materials. I thought I came up with a little over $4K earlier this month, but my numbers didn't make any sense to me! I redid them and came up with $3,813. I may have counted something twice.
I'm procrastinating working on the withholding and what I want to do about IRA vs Roth investing. Maybe tomorrow.
I opened a new CD at Navy Federal Credit Union this morning. Its been on my list for a week. I only put $75 in it to begin with as that is what was already in my savings account there. We have over $20K at another institution that I would like to transfer and add to the certificate. The maximum amount for this CD (at 2% for 17 months is $50K), so I can add the full amount and it can be added at anytime. So I at least took the first step!
I have only one tax statement thus far. It the 1098-T that universities send out showing qualified expenses they billed and the scholarships and grants provided. My husband's W2 should be available on Saturday. I will need to check the banks to see if they have 1099 INT (interest statement) forms available yet. Our taxes are pretty straight forward most years. I do want to get our return done as soon as possible to get that refund money in our account.
Another reason I want to complete our tax return is to do more planning for 2017. I'm still undecided about changing our retirement from Roth IRAs to Traditional (or TSP). I even went so far as to skip our contributions in January and make them up during the rest of the year, so that I can have more time to figure out what I want to do. This might mean I can use that $916 that I set aside on payday and put that towards tuition. This will mean we each need to contribute $500 a month for 11 months to meet the maximum contribution for the year.
In credit card news, I'm considering cancelling our Chase Freedom account (although I think my longest open account) and Discover. We still just have too many. I rarely take advantage of the 5% categories (although did use Discover at Christmas for all Amazon purchases). I think because of all the airline travel we are planning to do in the next few years, we would be better off putting a majority of our purchases on our Southwest Card, rather than accumulating cash in little bits over several cards. Trust me I know they add up, but I think the airline miles would be more advantageous to us. I'll let you know when I actually make a decision.
I've been crunching numbers to prepare for 2017 taxes. Yes, now at the beginning of the year. Part of the reason is to not have a big refund if possible. I want the money in my pocket now!
One site I use to calculate how different withholding amounts affect net pay is PayCheckCity.Pick salary or hourly as appropriate.
And the IRS calculator may be helpful also to figure how much you should be claiming for withholding in the first place. It can be found here.
Just sharing in hopes that it helps someone. I've always done our taxes (well a couple years early in our marriage my father in law did them, but he passed away in 2002). I found it helpful to understand how they work. The more you know, the less scary it is.
I've been crunching numbers.
I plan to claim the American Opportunity Tax credit on our taxes this year. We can claim qualified expenses. Those include tuition, fees, and required course materials, such as books, supplies and equipment. I think I'm also going to claim the money my daughter paid piano accompanists. It was required for the grade to perform with one.
The maximum we can claim is $4000, which as it turns out is just about what we paid. My number crunching came up with $4,102!
Now we did pay more out of pocket for unqualified expenses such as room and board. We just can't claim those. But I have used my daughter's Educational Savings account for most of that expense in 2016. By being able to claim the full $4000 in qualified expenses, we actually get a $2,500 benefit on our taxes.
My current estimate is that we will receive a tax refund of $1500 this season. I don't need too many tax forms to file this year, so I hope to file at the very beginning of February, so that I might have that money to pay tuition on February 12. I can cover it if the refund doesn't arrive prior to that.
I remembered that next year when I file for 2017 we can no longer claim a child tax credit for our youngest daughter. She turns 17 in 2017. The child tax credit is only for those children ages 16 or younger at the end of the tax year.
I'm a bit undecided on our financial goals this year. I know we will continue to invest for retirement. I'm looking into how and if I want to adjust anything. Part of this includes running through our taxes. The free online tax software I used last year for the military won't be available until Monday, January 16th.
I will also continue our youngest daughter's college savings. We started investing earlier for her, so she has a bit more accumulated. She turns 17 in 2017 so I will no longer get the child tax credit for her. Another part of my planning.
I want to continue to avoid student loans for my daughter in college. The bill in February will be the biggest outlay this year. I'm using some of her Educational Savings Account. The remainder, over $5K, will come from our bank account. We have savings, so will use that, but I'm trying to get most of it from current income before it is due. Right now I only have a little over $1K accumulated. I think I can get close to another $2K by the end of January. I also will put any tax refund towards the bill. I just may not have that in time to make the payment on February 12.
I was thinking this would be the year we would get a family vacation in, but it is starting to look like my husband will be at some out of town classes this summer. I do think we plan to visit colleges in the spring, and that will involve airfare and a hotel night or two. As soon as I save for tuition, I will save and pay for airfare. Honestly, I expect airfare for daughter's spring break in March and then again to come home in May. That will add up!
Once we are to summer, I may be looking at some tuition for my daughter to take a couple online courses. I can use her ESA funds for these or part of these. Once we get to Fall we are finally going to start using the Post 911 GI Bill benefits. The tuition and fees are covered in full. There is also payment for books, $500 a semester, and housing ($1062/mo, prorated). The housing payment doesn't cover our entire costs, we will likely need to pay about $1500 out of pocket. This is something I can easily pay from current cash flow at the time.
So I'm thinking about what we need to accomplish, I just don't have it nailed down specifically yet. I will get there though!
Our retirement investing is on auto pilot. My husband saves 10% of his base pay (this is pay that does not include our housing allowance). We also each max out our Roth IRAs for a total of $11,000 a year. Our total retirement investment for 2016 was $20,032.04.
The total balance in our retirement accounts at the end of 2015 was $330,739.99. We ended 2016 with a total balance of $392,814.02. A difference of $62,074.03. More than two thirds of that increase was growth!
I wish the market had done well enough for us to see $400K. We were really close at one point, but the market fluctuates. We will get there!
Our retirement savings rate is 17.45% of our income. I often bump this up every year by 1%. I'm pretty sure I will do it again this year, too. I'm also contemplating changing from Roth IRAs to Traditional. We are in the 15% tax bracket so the savings would be $1650 in taxes. I guess I figure this is money we could put toward college expenses that are happening now. I have a little over two weeks to decide (the auto investment happens around the 18th of the month for our Roth IRAs).
Are you increasing your retirement savings in 2017?
For a brief moment in time, we have zero charges on any of our credit cards! I paid them all off yesterday. There were no pending charges and we haven't used them since. That feels pretty good. We rarely have more than $1000 in charges at any one time, and we always pay them off before any interest would accrue. Technically, we pay them off twice a month when we are paid. Easy!
We put $1100 into savings. I need to build that back up after paying tuition earlier in the month. I also funded car repairs, auto insurance/registration, birthday and Christmas gift categories. Oh and set aside another $200 for plane tickets. We tend to do most of our savings in the second half of the month.
I also paid our vehicle registrations. The cost has dropped about $100 since last year since our vehicles are getting older. I think we will be at the current rate one more year and then the fee to register is just $50 each per year. Some advantages to older vehicles! I should recalculate how much I set aside to pay this each month to account for the difference.
College starts next week for our daughter. Thus a tuition and housing bill will be due in September. This made me think of the American Opportunity Credit, and wondering how much we might be eligible for.
After a lot of number crunching and estimating, I came up with credits worth between $2075 and $2500. The maximum is $2,500 based on a maximum of $4000 paid in qualified tuition expenses. Room and board are NOT qualified tuition expenses. It is actually our biggest expense.
This means we will get a refund in the spring. I'm estimating approximately $1178, up to $1553 depending on the American Opportunity credit.
I'm going to firm it all up once we have paid tuition in full. I've thought of changing withholding for the last two or two and a half months of the year. I figure it might be nicer to have the money earlier than wait for a refund. That will require some more number crunching later.
Our youngest daughter has $23K invested for college and we are still adding to it. We expect to put in another $5500 before she turns 18 in just over 2 years.
I'm getting concerned we have too much invested. Of course, I don't know that for sure. It's just based on how well things are going with our older daughter cost wise.
If we have cash leftover from our older daughter in her Education Savings account we can roll it to our youngest daughter, thus she will have even more money!
If we have too much money invested and go to withdraw it, we will have a penalty of 10%. I was thinking of changing the last amount of contributions for our daughter to our Roth IRA accounts. Actually, I would increase my husband's TSP retirement contributions which would lower our taxable income. We already maximize the Roth IRAs thus why I would put the money in the TSP. If we needed to withdraw that college money I would take it from the Roth IRAs since contributions are always available tax and penalty free.
I did a little looking while writing the post though. It turns out for both ESA and 529 plans, extra funds that can be contributed to having received a tax free scholarship can be with withdrawn and the penalty waived! Thus far my oldest daughter does have a large tax free scholarship that would easily help her withdraw and excess tax free.
Since this could be the case for our youngest daughter, I'm going to leave it be for now and just continue as planned. If anyone has any other thoughts though let me know.
I've spent some money. On needs. I picked up highlighters and a pencil sharpener for my daughter last night at Staples (who I feel is overpriced). Outflow was $5.34.
Today I went to Walmart and picked up pencil lead for my daughter, all purpose flour to make pizza, and shaving cream for my husband. Outflow was $7.28.
Now I suppose I could nitpick a bit and suggest my husband could use soap for shaving for the rest of the month, or that my daughter could use the one color of highlighter, or even I could make half a batch of pizza dough. But that isn't exactly the point. To go extreme. The point is to make conscious choices.
I was able to browse in both stores, but felt no real to desire to buy anything than I went in for. It is much more satisfying to leave knowing you only went in for needs and survived doing it!
I also have to admit I have a few things on a list, that probably could be considered needs, that I will probably purchase in March. Two of those are a new trashcan for my daughter's bathroom (it's cracked on two sides), and curtain rods for at least two bedrooms (we currently don't have any here, but can install if we remove and repair before we move).
Another free thing to do during a no spend month: delete old emails and computer files!
P.S. We received our tax refund of $359 today from the IRS. We're going to set that aside in savings.
We are on a roll so far! Wednesday was another no spend day for all of us here. I'm 99% sure today will be no spend as well. It's possible that coworker dinner is tonight, but my husband didn't think so. We are having leftover Five Bean Chili soup, salad and cheese bread for dinner.
I had my yogurt and coffee for breakfast. I opened a cat of tuna (shared some with the cats) and made a tuna salad sandwich for lunch. I may need an apple later to tide me over to dinner. My husband and daughter took their packed lunches.
I logged onto Military One Source, to get access to the free online tax preparation software. It's with H&R Block. It came up with a refund of $375! I thought we would OWE around $300. Apparently I'm not including something or calculating the American Opportunity Tax credit right. I do trust the calculations for the most part. To ease my mind before filing I may enter some things in another software program (for free) to confirm. Once I feel confident I have it all right, I will efile. Now that I have a refund I'm much more motivated to get our taxes complete!!
The refund will get saved initially. However, I may toss it at this years tuition bill, buy an airplane ticket or put it in our home furnishings budget. It will be useful at least!
Did you do your taxes? Refund or owe? Did you pay to have your tax return calculated? How much did you pay?
First, we never lost power during the storm. For that, I am extremely grateful. We have been inside our home for two days in order to stay safe. I'm definitely ready to get out today! Roads here are clear. Trees still have a little ice, but the dusting of snow has melted. We managed not to spend any money those two days either!
Today, the plan is to get out to get groceries for the rest of January, so back to spending. I'm adding toilet paper, cat food and litter, and laundry detergent to the list. This is an attempt to be be stocked up during the month of February since we are attempting a low spend (no spend) month.
I did just order a water filter for our fridge on Amazon. I used the balance of my Amazon gift card ($3.98) and Discover cash back ($2.52). I only paid $10.45 out of pocket.
I'm close to redeeming for Bing Rewards and Swagbucks again. I will use those $30 in February to get more filters for our vehicles. We realized we are a bit overdue for cabin and engine filters.
I cashed in 1650 MyPoints this morning for a Subway gift card. I will send it to my oldest daughter when it arrives. Hopefully, a gift in her Valentine's card. This will be the second gift card I have redeemed in the last 2.5 months with MyPoints. I have given both to my daughter. It's an easy way to give her a few extra surprises in the mail.
Oh, I guess I was suppose to write about taxes! Almost forgot. We have my husband's W2 forms, the new 1095 (health care), our mortgage interest statement, and a several other 1099s. I'm still waiting on the form from the university showing money we paid. Once that arrives I think we will be ready to start filing taxes. I will likely use FreeTaxUSA again. It seems to work for me.
Have you started your tax return? Do you have all the documents you need? Are you doing a no spend month this year? Have you redeemed any credit card rewards or points from another program recently?
Another chance to sign up for Ibotta and earn $10 after you redeem your first rebate. I'm about ready to cash out at $20. It seems there are a lot of great rebates right now. Especially for those of us dieting this month.
My referral code is here. I earn $5 after you redeem your first rebate. I think there is someone out there that used my code last time that hasn't redeemed their first rebate yet. Don't forget to do that! Over time the savings really add up.
We got our first W2 in the mail. It was a bit of a surprise. It is a result of our move. I can't quite remember what it is for. I think it is for the stuff we moved ourselves. Part of it isn't taxable, some is, and some was withheld for taxes. I was actually glad to see that, since I think that means we will owe even less than I originally estimated. I was thinking around $400-500. Now it will be about $250 less since more was withheld then I remembered.
We had changed the withholding on my husband's pay late in the year to account for overpaying. We have now changed it back to 8 for the coming year. It will go into effect for January 15 pay. The net check will be lower, but it is still higher than it had been before. It may still put us on target to pay around $400 each year, but that I can deal with.
I also remembered that we had put extra funds in my daughter's Educational Savings account (ESA) early last year and dropped our Roth IRA payments initially. By April we increased them to make sure we got the maximum funds in by year end. It worked well, but it means we now have $167 each month in our favor to budget with.
Along with a small pay increase, we actually have another $336 more each month to work with in 2016. I'm thinking I just need to funnel it away and not think to specifically what it needs to go for. By year end that would amount to $4032. I'd really like to make sure we are still adding to our savings, particularly now that we don't have a mortgage. I would pay that down if we did.
In other news, I took my daughter to the dentist today. All good. We have known that she will need her wisdom teeth pulled. We have set into motion a plan to make that happen. We have a consult over spring break with the oral surgeon. We had to pay $95 to even make the appointment, but it will be applied to any costs we incur. We expect the oral surgeon will want to remove all four wisdom teeth, and will have that done in the summer when she is home on break. That will give us time to monitor her for any complications. I think our insurance will cover most of the cost of oral surgery, but I will be attempting to get more information on that soon so I can plan. Checked and our insurance covers 40% up to $1300, so we will definitely have some costs.
Do you need to change your paycheck withholding now that it is a new year? It's a good time to calculate what you might need it to be. The IRS has a withholding calculator on their website. Have you paid for wisdom teeth removal? What did you pay?
My information was stolen from the government along with my husband's and 21.5 MILLION other people this summer. Ironically just this week the Army posted reminders about how to avoid identity theft. As if we only need to do these things to avoid theft of identity. What about our own government keeping the information provided to them safe?
We have been given three years of credit monitoring including our daughter under 18. Not sure about our oldest daughter seems she should get it too. She may be notified separately. There is identity restoration service and $1 million worth of insurance attached to this as well in case our identities are stolen causing financial harm.
Ick. Sometimes I really do dislike the government!
Oh, and the insurance company for the moving company is offering us $1400 of the $2600 we claimed for the damage they did to our things. One of the items that is damaged the most is being denied! We can appeal. We are going to discuss tonight to determine if we will or not.
Everything that was moved was put on an inventory. The driver logs it along with current damage. He seems to have logged damage on an entertainment center that would match the area we are claiming, but I think his notes were for other damage in that same area...not the big damage we now have and didn't have before. It is really hard to prove this unless we had up close pics before, which we don't. Why would we take a close up of the corner of furniture when it wasn't damaged? It appears someone attempted to repair the area with wax, marker and spray stain. It looks awful. And I feel so mad when I think about it.
I'm working on calculating our net paychecks for next year. I won't really have all information until January, but I have the taxable portion so I should be able to roughly calculate taxes owed for 2016. I need to know this to figure the withholding necessary. I was way off this year since I hadn't figured out the tuition tax credits. The main reason I want to figure net pay is so I can determine if we can actually afford this Europe trip my daughter wants to take. It is a trip that will cost us close to $5K. It is definitely something to plan for and figure out.
I do often use this blog to remind myself what my plans are. It can be helpful to look back months later to see what I did as well. This post is about how I plan to handle the tuition bill due Sept 12.
The total bill is $7,198.55. The housing portion is $5,154.55. The tuition portion is $2,044.00. The housing portion will come from our daughter's Education Savings Account (ESA) which is currently invested in mutual fund. The remainder is coming from savings/current cash.
I could pay $20 a semester to divide this bill into three equal payments. But that's just more outflow that I don't think is necessary. Initially, I'm simply going to transfer the full payment from our savings. We have quite a bit of cash in our emergency fund and from the proceeds of two homes.
The goal is then to pay ourselves back before the end of the year. We are adjusting our withholding to 18 (yes, that is not a typo) to have no Federal withholding for the remainder of the year. This will increase my husband's paychecks by $259.36. There are 8 paychecks remaining for 2015. This will result in $2,074.88 back into our savings account. Notice that is just over the amount of fall tuition. Because we are paying this tuition out of pocket we can claim it on our taxes with the American Opportunity Tax Credit.
The housing portion needs to come from our daughter's ESA account in order to pay ourselves back. Since the market is crazy, I'm not going to withdraw the full amount right now. Instead I'm going to withdraw in three equal portions of $1718. Currently I plan to wait to see if the market stabilizes a bit more later in September, but worse case wait until mid to late October to make the first withdrawal.
That's the plan. I think it is a pretty good one, too. No student loans, yet! Would you do anything different?
I now have more information about the costs of tuition this semester, what can be claimed for the American Opportunity tax credit and how it will impact our taxes owed. And the good news is we will owe less in taxes as a result!
The bad news(good news?) is we have already had too much tax withheld to cover our taxes. A whopping $1775. Yes, most people rejoice at such things praising the government for providing them a tax refund. Unfortunately, I blame myself. I actually increased our tax withholding to compensate for the fact that we would no longer be able to claim the child tax credit (of $1000) for our oldest daughter and my husbands increase in pay. I didn't take the time to figure out about the college credits available and how that would impact our taxes. Oops!
The good news is I have changed our withholding to 10 for the time being. In order to avoid any more withholding we need to claim 18! My husband will need to do this in person, as I can't change the amount higher than 10 online. Once it is changed to 18 his monthly paychecks will be $518 larger! Money that I plan to set aside for the tuition bill in February.
Of course, I will need to change the withholding in January to make sure we do have money withheld in 2016! I haven't figured the correct amount to withhold right now, but trust me I will do a better job this year in getting it right. I will have more clear information this time around.
Do you know where you stand on your withholding and taxes owed for 2015? Is it possible you need to make changes due to a change in circumstances? Do you prefer a refund or just to owe a little on your tax return?
So...I know about the American Opportunity Tax credit. It seems it doesn't cover room and board. It does cover tuition, fees and books...after scholarships. For this semester alone we have $2100 towards those costs.
If I understand correctly, I can claim tuition paid in the first three months of 2016 on our 2015 return. This means probably another $2K of expenses. So around $4k that we will pay from sources that are not college savings plans. My understanding is if I take this money from our Coverdell ESA those expense covered with this money can not be claimed for a credit. Which is fine with me since I currently plan to use that money for room and board, which I can't claim for the AO credit.
Then my understanding is the first 2K in expenses is a 100% credit. The next $2K is applied at 25% for a maximum of $2500.
Since this is a credit, it will directly impact our taxes owed. Currently I have us withholding about $520 per month for taxes. I think this is slightly more than our taxes before this credit. Now I'm debating about changing our withholding knowing this new information. If I reduce it, then I can save it for the next tuition bill in February. Or I could keep withholding the same and get a big refund, which I could then use to pay back the tuition we pay in February. I making an assumption that I wouldn't have the IRS refund by the Feb 12 due date.
Am I making any sense? Any other guidance? The credit is nearly always better than a deduction, so I'm not even looking at that scenario.
|<< Newer Entries||Older Entries >>|