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Taxes and Human Nature [Oct. 13th, 2007|11:15 am]
It's always been my thinking that claiming 0 on your tax form is almost always wise. People who argue otherwise (most people) say why let the government have your money when you could be earning interest on it?

The reason is human nature. Saving takes discipline. Most people who want or feel they need the money now don't have the discipline to save that money.

Now, I'm a great saver, but I still much prefer to get a refund over having to pay. It is worth the money I possibly lose in interest to not have to worry about coming up with tax money.

I feel our tax system is really messed up in the US. I think if they want my money they should send me a bill. The way taxes are currently done there are too many loop holes and unfair portions of the tax laws.

Anyhow, while it may make logical sense to claim more so you get more in your paycheck, due to human nature, in the majority of cases, I think it's penny wise and dollar foolish to do so.

I'm afraid of tax season coming up considering that Craig and I are 2 unmarried people who share a co-owned house. Now I wonder how that will work.

[User Picture]From: dorei
2007-10-13 07:47 pm (UTC)
See now, I am one of those people who try my darnedest to owe one dollar at the end of the year because I seriously don't want to give the government an interest free loan. I'd rather have my money through the year to use on things as I see fit. Of course every year some bizarre thing happens and I end up with a huge refund anyway, but even so, I *do* try.

I find the W-4 calculator on irs.gov is a good litmus test for figuring out what I need to have withheld, if anything, from my paychecks at any given time. Of course, it helps that I'm the one who does payroll, so if I wanted I could decide to take out none one pay period and seven the next and it wouldn't matter.
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[User Picture]From: starrynytes4me
2007-10-14 02:13 am (UTC)
I think that works well so long as the person plans for it. I personally like getting extra money in one check, even if it was mine all along.
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[User Picture]From: boringgirl
2007-10-13 07:57 pm (UTC)
tht is an interesting question on the interest on the house.... i'm guessing if both your names are on ownership... only one of you can claim the interest... but it had better be the one that can prove he or she paid it (who ever wrote the check is what I'm thinking....) but I guess if you each take turns writing the check, then each could claim whatever they could proved they paid...whatever you do, i'm sure the government wont let you all claim it twice... (meaning 2000 spend on interest for the total house and you each claim that same amount as a deduction) ... that I'm pretty sure would be illegal.... now I'm really intriqued.. I may ask my CPA friend about it as a hypothetical... if you are like me, you are too poor to bother itemizing anyway so it would be a moot point!
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[User Picture]From: starrynytes4me
2007-10-14 02:13 am (UTC)
I itemize and will need to because of my charity donations as well as my medical account (many medical bills). I pay the mortgage with my checks. It will be strange to figure it out.
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[User Picture]From: morghon
2007-10-14 07:33 pm (UTC)
You can divide it any way you want to. You can take half and let him have half or you can go 70/30 if you want as long as you don't try to take more than 100% of the deduction total. Look at the big tax picture and then decide what combination makes the most sense.

You will get a form from the mortgage company that says how much interest has been paid on the loan for the year. Include this with your taxes. The IRS does not care who wrote the checks, they just need to see the form. If both of you are on the loan then both names will be on the form.

I have owned houses with my brother and also with Brian and we often split the deduction. It has never been a problem and all of our accountants said it was fine.

This year I am thinking of giving my interest deduction to Brian because I didn't have much income due to my surgical complications. I am going to let him claim me as a dependant since he has supported me most of the year and I am hoping that he can claim the mortgage interest deduction even though only my name is on the loan since I will be his dependant. I have yet to run this by the accountant though.
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[User Picture]From: starrynytes4me
2007-10-14 02:16 am (UTC)
Tax time is still super stressful for me. Not having any kids is just a killer for taxes, which I don't really get since kids use lots of services, like schools. On top of it, I have stock, so that is weird. On top of that, I had threatening letters from the IRS a few years back because I didn't calculate my stock sale correctly. Now I pay to get it done, but I still hate it. I think if they want my money they should have to send me a bill. Why are they allowed to cause so much stress for so many people, not to mention all of the tax loopholes people who are really super rich can use.
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[User Picture]From: gonzy317
2007-10-14 01:53 am (UTC)
We claim 0 up until hubby hits the limit for SS, and then we bump it up to 5 (our actual # of dependents). I claim 0 all year long. We always have an awesome refund, and are able to plan the years' vacations or get to buy something BIG or FUN. We look at it as our 'entertainment' account.

Not sure what to tell you on the house... interesting question. We had two houses for the majority of this year, so the interest and closing costs we paid will really bump our refunds along. Not sure what to do with you "co-habitating" except maybe split it down the middle? I dunno. I would certainly ask an accountant!! :)

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[User Picture]From: starrynytes4me
2007-10-14 02:19 am (UTC)
That's cool about the vacations :) I'm hoping that I'll get a refund this year. We could really use it with the house. I'd love to be able to purchase some chairs for the bedroom as we have a lovely view.
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