Sunday, March 02, 2008

I Heart Taxes! ...WTF?

I know that I have a month and a half before taxes are due, but I like to have mine in early, which means I spent last weekend figuring them out for the year. In years past I've usually had just about as much tax withheld as I needed so that I didn't have to pay much and didn't get that big of a refund. I'm really opposed to letting the government have an interest free loan from my back pocket. This year, however, I'll be getting a rather decent sized refund. How decent sized? Well, I don't want to give out any specific numbers, but speaking in thousands would be an appropriate way of measuring the size.

Why is this year so different? Two reasons. First, I purchased a house. It's lovely being able to deduct all of that interest that I have to shell out, especially since my brain has such a hard time comprehending how about 3/4 or more of each month's mortgage payment right now is going simply to interest. Second, most of my stock & mutual fund income was in the form of long-term gains, which is taxed at a lower rate than my short-term gains.

It's really weird having such a huge refund coming. Of course the first thought to cross my mind is, "What the heck can I buy with all that dough?" Then I realize that I really don't have anything I need or even want all that bad. More than likely it'll get reinvested in the stock market or, depending upon the continuing housing market, put towards purchasing another property. I think it's quite possible to get a few good steals in the housing market in the next year and having a rental property would help to diversify my investments and would also, hopefully, provide another small tax shelter.

I'm always curious as to what people do with their refunds, and I'm sure it all depends upon the size of the refund, but when you have a large pile of money drop into your lap, are you more likely to spend it on frivolous stuff or put it to use frugally? It's tempting to think about buying a new car or new furniture or taking an expensive vacation, but I think I'm just too much of a penny pincher to really go out and indulge myself on extravagant and expensive excesses.

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