Progress to Date

  • Original Loan Amount: $204,000.00
  • Balance at Beginning of 5-year Goal (1/1/08): $188,983.82 @ 6.00%
  • Balance at Refinance in February 2009: $148,000.00 @ 4.625%
  • Outstanding Balance: $0.00 (PAID IN FULL!!!)
  • Latest Payment Date: April 2011
  • Latest Additional Principal Amount: $17,623.22
  • Amount Ahead of Schedule (since refinance): $121,462
  • Time Ahead of Schedule (since refinance): 7 years 10 months
  • Interest Saved Last Month: $23,972.48
  • Total Interest Saved: $28,435.55 ($1,037.74 on original mortgage; $27,397.81 on current mortgage)
  • Months Remaining in 5-year Goal: 20
  • Average Monthly Principal Needed to Meet Goal: N/A (Goal achieved)
  • Progress List Explained

Tuesday, April 14, 2009

Another Tax Bill

After last year's big tax bill, I was hopeful that the actions we took in 2008 to modify our allowances (withholding more taxes each paycheck) would result in a lower tax bill this year. Unfortunately, that was not the case. We owe even more this time around. Although we did update our W-4s after filing our taxes last spring, we had several months of inadequate withholding to overcome. We also (fortunately) earned more in 2008 than in 2007, while having fewer deductions (including less mortgage interest paid).

I'm guessing we'll run into the same issue next year. The instructions for the form W-4 advises married couples with two incomes to withhold extra money on top of zero allowances. We've decided against that. We can instead save on our own, earning interest on the money we save, and expect to pay a tax bill each year instead of receiving a refund. At least it wasn't a surprise this time around.

To make matters worse, our tax withheld for 2009 will be even less this year than it should be. As a planned stimulus measure, the IRS requires employers to withhold a smaller amount each paycheck starting this month. However, for dual workers like my wife and I, the reduced withholding is being credited to us twice (once for each of our paychecks). This means we will have more money available in the short term, but could have an even larger tax bill at this time in 2010 -- because we'll have to make up for the current overpayment when it's time to square things up with the government.

We're not going to make much of an extra payment to our mortgage principal in April because of the tax bill. However, my wife picked up some extra work this month, so we should have a modest amount of additional income to help offset the big expense.

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