With the end of the year in sight, it is time to do our annual tax forecast. Shae and I like to gather up our numbers and estimate how much of a tax liability we will have in April. Now is a good time to do it because there is still time to make adjustments to IRA contributions and 4Q estimated payments (due in January) for my business.
A really simple tool to use is Intuit’s TaxCaster. Intuit is the company that makes TurboTax and Mint.com. After putting in our numbers, it looks like we’ll end up overpaying if we stay the course.
Our total tax bill will be about the same as 2014 even though we made more money in 2015. We were able to squirrel away more income into tax deferred accounts such as 401ks and IRAs this year. Self employment tax continues to be a major bane as there are no loop holes to get out of it. Ugh!
For 2016 our goal is to drastically reduce our tax liability by fully funding our retirement accounts. This year we finished paying off our house so we shouldn’t need as much cash flow in the coming year. If you want to read a truly inspirational account of one couple paying a meager $150 in income taxes on $150,000 income go read this blog post here. Spoiler alert, the answer is to shove as much money into tax sheltered accounts as possible and have lots of kids (ok, just 3).