I know my daddy loves me but he seems much happier with me during income tax time. A whole year of taking care of me yields some sort of tax windfall as long as my daddy's adjusted gross income is not too high and he is not in the alternative minimum tax. The one thing I have learned by being the daughter of a public accountant practicing tax is that you get your tax benefits as soon as you are able. Money received today is much better than money received tomorrow.
I do love my daughter and I am very proud to hear her say these words. It is absolutely true that is always better to get money today as opposed to waiting for tomorrow. If we are in receipt of funds today, we can make investments, put more money in our 401K's, pay extra on our mortgages, and take care of our current life styles without running up debt and finance charges. What is really being said here is take advantage of your income tax benefits today. Do not wait until year end; do not run up credit card debt to make ends meet just to get a big tax refund. Have use of your money this very day and begin planning for your future. Here's how you can take advantage of your income tax benefits today:
Husband and wife with two kids 4 exemptions
Mortgage interest ($24,000-10,300 standard deduction) 4 exemptions
Real estate taxes ($4,000) 1 exemption
State income taxes ($7,000) 2 exemptions
Contributions ($10,000) 3 exemptions
In this scenario, husband works and wife has no income. The standard deduction for married individuals filing a joint return is $10,300 which is already factored into the income tax withholding tables used by your employers. This amount was subtracted from the mortgage interest expense but could have been deducted from the total to arrive at the same result. The personal exemption amount used in this calculation was $3,300 with exemptions rounded to the nearest ones place. Assuming that this family is in the 25% bracket for federal purposes, the extra 10 exemptions will save $8,250 annually. This would breakdown to $688 more each month. Imagine the difference this would have in your monthly budget. If this money were invested each month or used to pay down some of the outstanding mortgage balance, the economic benefit will go well beyond this tax savings. The power of compounding interest will turn this monthly benefit into a much bigger economic gain.
Please my friends, my daughter and I urge you to calculate your income tax benefits for 2007 and beyond. Please take advantage of your benefits today to secure a more advanced economic well being tomorrow. Remember, if both spouses work, the subtraction will have to be $20,600 as both spouses will have this standard deduction built in to their respective withholding tables. If you are in the alternative minimum tax, please do not take into consideration your real estate taxes, personal property taxes, and income taxes.
Ron Piner, CPA
Host of "Better Business"
Saturday Mornings at 10ET
On WBIS AM 1190