We just did our taxes and found out that we overpaid by $5100! Oops and yay!
Itemizing was Finally Worth It
Self-employment has positives and negatives. The largest negative is that we pay the employer’s part of social security and Medicare taxes, which means that we hand over an additional 7.65% to the IRS along with our normal taxes, but blah, blah, blah. That’s definitely a first world problem. This post isn’t to whine.
Since our current home does rack up the mortgage interest, itemizing our deductions for 2013 was financially beneficial to us for the first time ever. Before this, the standard deduction was always higher for us. I know that having $17,000 in deductions isn’t actually a good thing since it means we spent more than before, but I’ll take the silver linings that I can get.
Why It Couldn’t Be Easily Avoided
Four years ago, I would have hit myself upside the head for letting the government borrow $5100 for me interest-free. BUT, estimated quarterly taxes are only super easy if you take the previous year’s tax return, divide the total owed by 4, and then send them that amount 4 times throughout the year. 🙂
We never really know if we will make less or more, but at least this divide-by-4 method guarantees that we will be penalty-free when April rolls around. And to ensure we don’t cry if we do make more than expected, we save big chunks of any extra for taxes too. In the end, this method works for us, but it does mean that we’ll be giving out free loans some years. There’s worse problems. 😉
Drumroll please…we’ll be using this $5100 for…wait for it…our 2014 Roth IRA’s.
Yep, we’re exciting people. Seriously, this makes us really happy. This $5100 along with what we already have put aside will max out our contributions for 2014. That will check off our first main goal for this year!!! Woot! Then we can move on to the others we still have left like the car fund, an extra money account which may be used for a second rental property, and then the fun ones like our summer trip. So this is putting us closer to the fun stuff!
You’ve been asked a million times about your tax refund. So I’ll say, mix it up and ask or comment about anything you want! How was your breakfast? I just wanted to share our recent tax hijinks. 😉
FYI: I worked at a dead end cubicle job from 2005-2011 for about $30,000 per year. I went self-employed in July 2011 and make between $80,000-$100,000 through blogging, professional pet sitting, hubby's reffing, and our rental home. If you’d like to start your own site (link to my free step-by-step guide), I highly suggest checking out Bluehost (my referral link with a nice discount for you, PLUS a free custom header banner from me!). I even have all of my favorite tools on a resource page - I hope they help you too. Please contact me any time at budgetingfunstuff*at*gmail*dot*com with questions or just to brainstorm! I’d love to help!