I just submitted our Federal and State income taxes for 2015. The numbers were very similar to 2014. We had an effective tax rate of 11% with total income compensation that would place us in the 25% bracket.
This year, like previous years, we did our taxes ourself using pen and paper. Maybe sometime in the future we will switch over to an accountant or software, but our situation isn’t overly complicated (yet).
- One W2
- Ordinary/Qualified dividends
- Schedule C (business income)
- Schedule SE (self employment tax)
- Schedule D (capital gains tax)
- Form 8949 (helper form for Schedule D)
I like doing taxes ourself because it forces us to learn about the tax code and helps identify what changes we can make to reduce how much we pay. Software tools such as Turbo Tax like to advertise guarantees for the best refund possible, but they don’t give advice on how to improve for next year.
For instance, this year I learned that we did not qualify for the dependent care benefit. I had written previously about using both a FSA, flexible spending account, and the DCB but it turns out that our FSA of $5000 disqualifies us from any DCB credit. What I did learn however is that it would work with 2 or more dependents. Tax software isn’t going to tell you that.
Our goal for 2016 is to dump as much money as possible into tax protected accounts. Taxes in general, but especially income taxes are our largest expense now that our house is paid off. In 2015, federal income tax, state income tax, property tax, and sales taxes took about a twenty thousand dollar bite out of our budget. Ya, I don’t like taxes.
You can view last years discussion on taxes here.