The Tax Man

One of the main benefits of our home purchase (besides making $20K the day we closed...on paper at least) is the tax breaks to come in 2008. The last two years we have gotten killed on taxes. Two incomes and no kids = your paying a lot in taxes. Our 2006 tax strategy was maxing out my 401K and just about maxing out my wifes. In addition to this I was also paying an extra $300 a paycheck to taxes. I did this by adjusting my W-4 form and checking the box "additional amount". I was trying to spread out the pain throughout the year. We still ended up owing a few thousand dollars. In 2007, we have cut down on our 401K contributions in order to increase our take home pay and ability to save additional cash in our ING account. I have also changed my W4 form to only take an additional $250 per paycheck. I am expecting to still owe some money for 2007. We may be able to save some money on taxes from the deduction of loan interest and any additional tax breaks from purchasing our home, however since we bought in May we will not receive the full tax benefits this year.

January 1, 2008 is a brand new day. I will immediately adjust my W4 form and give myself a $250 a paycheck raise. This will be nice. My plan is to put this money automatically into savings buy bumping up our ING savings rate. This should put us up to $750 a week in savings! I am expecting 2008 tax year to be completely different for us. We should be able to deduct over twice as much from our 2006 and 2007 filings.