Tuesday, February 19, 2008

Tax Refund

Whoo-hoo, it's great having a mortgage! I'm going to get a refund of $4, 465 from the feds and $1,539 from NY state. Yes, I know I've been giving Uncle Sam a free loan all year yadda yadda but I'm still very happy to be getting this money. Being able to deduct that mortgage interest has made a big difference in my tax situation! Last year I only got a total of $2,844 back.
I was surprised that my refund was this big, as I'd already adjusted my withholding in March 2007. I wonder if I should have adjusted it even more! It's nice to be hanging onto more of my hard-earned cash throughout the year, but the thing is to make sure I don't end up spending it! As Jim at Blueprint for Financial Prosperity pointed out in one of his Devil's Advocate posts, the amount of money you'd earn in interest by minimizing your withholding isn't necessarily all that much-- more money is never a bad thing, even if it's only a couple hundred bucks, but does it outweigh the psychological advantage of forced savings? I may take another look at my budget for the year with all this in mind...

8 comments:

Anonymous said...

That's more than (okay only a little more than) $6000 in refunds! Woohoo! There's the expensive trip you've been talking about -- or a big chunk into savings -- or something else really good!

But it's not like you haven't been able to live just fine on what you've been taking home, so you might not want to increase your monthly budget. You don't carry a lot of debt on credit cards, so I would go for saving more in the future. If you want the "forced savings" effect, lower your withholding, and automatically put $500 each month into savings or your investment account. I wouldn't lower my withholding the whole amount (who knows what will happen with taxes next year, and I HATE owing money when I do my taxes), but perhaps $400, for safety's sake. If you still get a refund, even a smaller refund, next year, you can do something fun with it. And, if you saved $400 more each month, just think how compound interest would make the total mount up!

Madame X said...

Oh, I definitely didn't mean I was thinking of increasing my spending budget! I just wanted to be sure that if I was getting a $6000 lump sum refund this year, I wanted to budget appropriately to save at least $3-400 a month out of my higher take-home pay, assuming I'd still get a refund of some smaller amount. It's a little hard to predict, but I don't want to end up with any less money saved, whether I am saving it gradually now, or in a lump sum later.

Anonymous said...

Since you have a money blog, you know you can save $. So, think straight and believe that tax rebate is only for suckers.

L. Marie Joseph said...

" the amount of money you'd earn in interest by minimizing your withholding isn't necessarily all that much" I agree 110%.

****Veteran Military Wife at Life Lessons of a Military Wife**** said...

Don't file just yet! Many brokerage funds and companies will be sending out corrected 1099s because of all the tax code changes....filing at the end of February or early March will alleviate you having to refile! Also less chance of any audit if you file then (from what I've read, statistic-wise).

Escape Brooklyn said...

Wow, congrats on such a large refund! Isn't being a homeowner great? ;)

Alison said...

I'm in the same boat as you, and should be expecting a hefty refund this year. I was so excited to see such a large number after I input all my info into Turbotax. No matter what they say about lost interest, it's always a good feeling to have "extra" money!

frugal zeitgeist said...

Nice!!! I got a lot less than that, but more than I expected. I had to adjust my withholding for New York State because I owe them. No refund is better for savers, but it feels like winning the lottery or something when you find out how much you're getting back.