Did anything surprise you in your 2016 taxes?

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happymob
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Did anything surprise you in your 2016 taxes?

Postby happymob » Tue Apr 18, 2017 12:12 pm

The intent of this thread is to spread the word about oddball tax situations that people may not know about to better plan for 2017. With that said, is there anything about your 2016 taxes that caught you off-guard?

In my case, it was the retirement saver's credit. Our AGI was lower this year than usual and I didn't fill the 15% bracket with Roth conversions like I did last year. As a result, we were right on the boundary to receive $400 from the savers credit. I was surprised by both the relatively high threshold for the credit ($61,500 for MFJ) and the fact that it is based on AGI, rather than MAGI, so you can tweak your income to qualify. Until everything was entered, I thought I might have recharacterize some Roth contributions to traditional to bring the AGI down.

What were you surprised by?

Tamarind
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Re: Did anything surprise you in your 2016 taxes?

Postby Tamarind » Tue Apr 18, 2017 12:44 pm

I recieved partial reimbursement from my county Soil and Water Conservation District for installing a rainwater retention system at my home. County website was aimed at farmers but program available to all residents with erosion problems. I didn't realize until the 1099g arrived that reimbursement was actually a taxable grant, and that statements on the website about tax assumed that the owner of the property would take an offsetting deduction for farm expenses (not available to urban homeowners). Failure to research on my part.

The Wizard
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Re: Did anything surprise you in your 2016 taxes?

Postby The Wizard » Tue Apr 18, 2017 12:51 pm

No surprises for me.
I did have quite higher AGI than I might have due to part-time work on top of retirement income.
But I withheld properly and hit my tax liability pretty closely...
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bigred77
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Re: Did anything surprise you in your 2016 taxes?

Postby bigred77 » Tue Apr 18, 2017 12:57 pm

No real surprises other than our tax liability was higher than I would have guessed (although if I had done any projections I would have clearly seen it coming). Refinanced in late 2015 so less mortgage interest, no tuition expenses to deduct in 2016, and more income. Was an eye opener though.

tech_arch
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Re: Did anything surprise you in your 2016 taxes?

Postby tech_arch » Tue Apr 18, 2017 12:58 pm

All our fault, but I was surprised at the amount we owe. Our 2016 income was much higher and we didn't update our W-4s to have extra money withheld. We also didn't realize some deductions would be phased out.

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Re: Did anything surprise you in your 2016 taxes?

Postby EATaxGuy » Tue Apr 18, 2017 12:59 pm

Someone had me review their 2015 return and despite having an expensive employer-provided health insurance plan for his entire family, he had paid the ACA shared responsibility (penalty) payment.
:oops:
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Artsdoctor
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Re: Did anything surprise you in your 2016 taxes?

Postby Artsdoctor » Tue Apr 18, 2017 1:02 pm

Yes. There seem to be endless ways to mess up predicting the marginal tax rate when you're in the AMT. Predictions are great but I'm always surprised at how finicky that AMT phase out formula is. You can think you're in the 28% marginal rate and without much effort, be much higher in no time.

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Re: Did anything surprise you in your 2016 taxes?

Postby White Coat Investor » Tue Apr 18, 2017 1:08 pm

happymob wrote:The intent of this thread is to spread the word about oddball tax situations that people may not know about to better plan for 2017. With that said, is there anything about your 2016 taxes that caught you off-guard?

In my case, it was the retirement saver's credit. Our AGI was lower this year than usual and I didn't fill the 15% bracket with Roth conversions like I did last year. As a result, we were right on the boundary to receive $400 from the savers credit. I was surprised by both the relatively high threshold for the credit ($61,500 for MFJ) and the fact that it is based on AGI, rather than MAGI, so you can tweak your income to qualify. Until everything was entered, I thought I might have recharacterize some Roth contributions to traditional to bring the AGI down.

What were you surprised by?


I was surprised how much faster my itemized deductions phase out on my state taxes (UT) as opposed to federal. I only lost 15% or so of them on Federal, but was completely phased out on state.
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TomatoTomahto
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Re: Did anything surprise you in your 2016 taxes?

Postby TomatoTomahto » Tue Apr 18, 2017 1:12 pm

Artsdoctor wrote:Yes. There seem to be endless ways to mess up predicting the marginal tax rate when you're in the AMT. Predictions are great but I'm always surprised at how finicky that AMT phase out formula is. You can think you're in the 28% marginal rate and without much effort, be much higher in no time.

I told my CPA that I had paid 5 quarters of property tax (i.e. paid one quarter early) and he warned me to ask first, because of a possible side effect with AMT. As it happens, it had no effect.

new2bogle
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Re: Did anything surprise you in your 2016 taxes?

Postby new2bogle » Tue Apr 18, 2017 1:12 pm

Filed my extension today as I do every year on tax day. Nothing surprising in my taxes from last year though

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Re: Did anything surprise you in your 2016 taxes?

Postby inbox788 » Tue Apr 18, 2017 1:20 pm

My speculative investments made nearly zero the first 6 months, but had big gains in the 4th quarter. I made estimated payments in Q4, but only enough to get to 90% of taxes due. But apparently my accountant thinks I owe some penalties because the estimated payments weren't even throughout the year. How was I to know the last quarter was going to be a big gain, I don't know. Anyway, I guess it's better than if it was a big loss.

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Re: Did anything surprise you in your 2016 taxes?

Postby Carefreeap » Tue Apr 18, 2017 1:21 pm

Yes. We wound up paying no Federal Income tax this year and got a full refund of the $8200 in estimated taxes we paid in 2016. We thought we would have to pay some cap gains on a property we sold. We've made that a payment on account because we know we'll need to pay cap gains for another property we're hoping to sell this summer

We wound up paying about $3500 in CA state tax and got a refund of about $11,000 as there was a mandatory w/h at the time of the property sale. We're taking that refund since CA has the mandatory w/h for when the next property sells.

But we'll pay the price this year. Our CPA used up all our carry-forwards last year so we'll get hit with an estimate cap gains of about $260k this year if the condo sells for the price I think it will. Given that when I took it over from my mom's upside down estate in 2008 when there was no equity and it was weeks from being foreclosed on, I'm happy that things have worked out the way they did. While I'd like a way to minimize the taxes freeing up close to $300k in gross equity is a good thing!

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Re: Did anything surprise you in your 2016 taxes?

Postby Not Law » Tue Apr 18, 2017 1:29 pm

May MAGI was 139% of poverty level, so the December fine tuning came out almost perfectly for ACA subsidies! My goal was to stay between 138% and 150%. Now that I have this figured out, there is serious talk of changing things.

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Kevin M
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Re: Did anything surprise you in your 2016 taxes?

Postby Kevin M » Tue Apr 18, 2017 1:36 pm

Good thread subject! Here's mine.

I almost forgot to include the interest from some I Bonds my wife sold, since the 1099 from TreasuryDirect got downloaded into a different folder than her other 1099s. I realized the oversight when reviewing our CA return, and not seeing any subtractions from income for US government securities. But that's not the surprise.

Never in the past had I qualified for the qualified educational expense deduction for savings bond interest, due to AGI being too high, but in running through that section of the tax software, it looked like we might this time. However, in the end only $38 out of $712 of interest was exempt. Why so low? AGI was not the problem.

Turns out that whatever portion of qualified educational expenses are used to qualify for an education tax credit are excluded from the calculation of the savings bond interest exclusion. Since we had used up the four years of the American Opportunity Tax Credit, which would have consumed $4K of qualified educational expenses (QEE) to get the max credit, we took the Lifetime Learning Credit, which consumed $10K to get the max $2K credit. You take what's left of the QEE and divide by the redemption value of the savings bonds to calculate the deductible portion, which turned out to about 5.4% in our case.

Now for the real surprise. A 529 contribution counts as QEE for purposes of the exclusion of interest calculation. I had made annual 529 contributions of $14K in several previous years, including 2015, but did not in 2016, since I thought I would be taking a distribution in 2016, since my daughter only has a couple of years left in her graduate program. I ended up not taking a distribution in 2016, since I'm now thinking about keeping the 529, and changing the beneficiary to be my granddaughter. So, in retrospect, it would have made sense to make a $14K contribution to the 529 for 2016, and we would have ended up excluding closer to 75% of the interest.

To be fair, we did not know at the beginning of 2016 that my wife would be selling her I Bonds--we ended up doing so later in the year to raise cash to buy a house. Also, I had no idea how the interest exclusion worked, having never been eligible for it in the past. But, if I had known how it worked, I would have made a $14K contribution to the 529 in December 2016.

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Re: Did anything surprise you in your 2016 taxes?

Postby flamesabers » Tue Apr 18, 2017 1:43 pm

For 2016's taxes I had to pay in for my federal taxes for the first time ever. Oddly enough, I only had to pay in $1. :o

The surprise of having to pay in for federal taxes (even for a trivial amount) motivated me to max out my 401k contributions this year so that I won't have to worry about getting hit with a bigger tax bill next year.

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Re: Did anything surprise you in your 2016 taxes?

Postby TomatoTomahto » Tue Apr 18, 2017 1:48 pm

flamesabers wrote:For 2016's taxes I had to pay in for my federal taxes for the first time ever. Oddly enough, I only had to pay in $1. :o

The surprise of having to pay in for federal taxes (even for a trivial amount) motivated me to max out my 401k contributions this year so that I won't have to worry about getting hit with a bigger tax bill next year.

Yes, that dreaded $2 tax bill :D

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Re: Did anything surprise you in your 2016 taxes?

Postby Texanbybirth » Tue Apr 18, 2017 1:51 pm

Our taxes were almost exactly as I'd calculated them in February of last year. We're a solidly middle-class, one-income family with kids. It's a fairly plain jane situation.

Some clients had more SS withheld than necessary because of last minute overtime shifts, so they got a surprisingly higher refund (it can be difficult to convince people to do a better job planning throughout the year); and I got to experience the wackiness of taxes in one Northeastern state compared to another Northeastern state. (State names withheld for overly-cautious confidentiality sentiments.)

It was a good/fun tax year! :D

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Re: Did anything surprise you in your 2016 taxes?

Postby flamesabers » Tue Apr 18, 2017 2:03 pm

TomatoTomahto wrote:
flamesabers wrote:For 2016's taxes I had to pay in for my federal taxes for the first time ever. Oddly enough, I only had to pay in $1. :o

The surprise of having to pay in for federal taxes (even for a trivial amount) motivated me to max out my 401k contributions this year so that I won't have to worry about getting hit with a bigger tax bill next year.

Yes, that dreaded $2 tax bill :D


Since I got a raise this year, it'll probably be more then $2 if I wasn't maxing out my 401k contributions.

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Re: Did anything surprise you in your 2016 taxes?

Postby Random Poster » Tue Apr 18, 2017 2:12 pm

That I may end up amending my 2016 return to avail myself of foreign tax credit carryovers.

I just took the foreign tax credit equal to the amount of foreign tax paid via the International Stock Index fund (which was under $600) and moved on, but now I'm working on what the difference would be had I filled out Form 1116 and used some of the foreign tax carryovers that I somehow amassed while working as an expat. In years prior, my employer took care of preparing my tax returns, but this year I'm back to doing them on my own.

My rough calculations at the moment suggest an additional $500 refund would be due (and would result in taking a larger foreign tax credit than I---through the International Index fund---actually "paid" in 2016), but the paperwork is a bit tedious and I don't know if it is all really worth it. Plus, I've never filed an amended tax return before either, so there's a bit of learning that would be involved in doing that as well.
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Re: Did anything surprise you in your 2016 taxes?

Postby AmericanCanadian » Tue Apr 18, 2017 2:13 pm

I was surprised that California appears to be able to tax nearly the entirety of my self-employment income (because I have a California customer) even though I've moved to Canada, and only set foot in California briefly for business trips. :?

Details in another thread: https://www.bogleheads.org/forum/viewtopic.php?f=2&t=216748

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Re: Did anything surprise you in your 2016 taxes?

Postby jhfenton » Tue Apr 18, 2017 2:17 pm

Not on our federal or state. We're getting a low two-digit federal refund and a mid two-digit state refund. Our smallest combined "error" ever.

Unfortunately, we have to write a check to our city for $1,000 today because one of my wife's part-year jobs last year failed to withhold any city taxes. :oops:

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Re: Did anything surprise you in your 2016 taxes?

Postby pshonore » Tue Apr 18, 2017 2:29 pm

inbox788 wrote:My speculative investments made nearly zero the first 6 months, but had big gains in the 4th quarter. I made estimated payments in Q4, but only enough to get to 90% of taxes due. But apparently my accountant thinks I owe some penalties because the estimated payments weren't even throughout the year. How was I to know the last quarter was going to be a big gain, I don't know. Anyway, I guess it's better than if it was a big loss.

You may need a new accountant. As long as your estimated payments match your income by quarter, you're ok. Of course you probably should file Form 2210 and use the Annualized Installment method to confirm that . He'll earn his money filling out that form.

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Re: Did anything surprise you in your 2016 taxes?

Postby pshonore » Tue Apr 18, 2017 2:32 pm

Texanbybirth wrote:Our taxes were almost exactly as I'd calculated them in February of last year. We're a solidly middle-class, one-income family with kids. It's a fairly plain jane situation.

Some clients had more SS withheld than necessary because of last minute overtime shifts, so they got a surprisingly higher refund (it can be difficult to convince people to do a better job planning throughout the year); and I got to experience the wackiness of taxes in one Northeastern state compared to another Northeastern state. (State names withheld for overly-cautious confidentiality sentiments.)

It was a good/fun tax year! :D
Not sure how overtime can cause excess SS withholding unless they have multiple employers. If not, IRS will not refund it; you have to start with the employer.

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Watty
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Re: Did anything surprise you in your 2016 taxes?

Postby Watty » Tue Apr 18, 2017 2:40 pm

I filed my Federal tax return for a refund electronically because that was free with my software. I had to make a payment on my state taxes but the electronic filing was not free so I just mailed in a paper return with the check.

The thing that surprised me was that federal refund was deposited in my checking account about a week before my state cashed my check.

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Re: Did anything surprise you in your 2016 taxes?

Postby FreeAtLast » Tue Apr 18, 2017 2:41 pm

You betcha! I have a CPA do my tax returns, but I use the free Tax Caster to determine my estimated tax payments. For my federal returns, I hit my tax obligation right on the nose, receiving a refund of $41. But free Tax Caster does not figure state returns (I live in upstate New York). So I guessed at my NYS obligation. Imagine my surprise when I got a NYS refund of $845. What happened was that I took my first IRA distribution in 2016. On the federal return, the withdrawal amount is taxed as ordinary income. However, on the NYS return, that amount is first entered as taxable income (line 9 on IT-201).....and then further on down the page the same amount is listed as a NYS subtraction (line 29); so they cancel out! It's not often that I screw up with my taxes and get a happy result; you can be sure I won't make that mistake again. :oops:
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LiterallyIronic
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Re: Did anything surprise you in your 2016 taxes?

Postby LiterallyIronic » Tue Apr 18, 2017 2:41 pm

Our household income was $66,000. We paid over $5,000 in federal income tax. My brother-in-law's household income was $89,000. He paid only $500 in federal income tax. Both figures include the amount paid over the course of the year plus the amount paid in April (or minus the refund). Surprised me. But mostly angered me.

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Re: Did anything surprise you in your 2016 taxes?

Postby Texanbybirth » Tue Apr 18, 2017 2:44 pm

pshonore wrote:
Texanbybirth wrote:Our taxes were almost exactly as I'd calculated them in February of last year. We're a solidly middle-class, one-income family with kids. It's a fairly plain jane situation.

Some clients had more SS withheld than necessary because of last minute overtime shifts, so they got a surprisingly higher refund (it can be difficult to convince people to do a better job planning throughout the year); and I got to experience the wackiness of taxes in one Northeastern state compared to another Northeastern state. (State names withheld for overly-cautious confidentiality sentiments.)

It was a good/fun tax year! :D
Not sure how overtime can cause excess SS withholding unless they have multiple employers. If not, IRS will not refund it; you have to start with the employer.


Ding ding ding, we have a winner!

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Re: Did anything surprise you in your 2016 taxes?

Postby triceratop » Tue Apr 18, 2017 3:13 pm

I fill out my taxes by hand. No major surprises this year, but I made one error in tax planning. I tax gain harvested nearly to the top of the 15% tax bracket, so I paid no gains. But I didn't realize the California 8% bracket started so low so I paid a few dollars in that bracket. I should've maxed out the 6% tax bracket with gains and reserved the rest for 2017 when I can fill the 6% bracket again.

I think it cost me about $10. I canceled Spotify for two months to compensate for my error. :)

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Re: Did anything surprise you in your 2016 taxes?

Postby inbox788 » Tue Apr 18, 2017 3:18 pm

pshonore wrote:
inbox788 wrote:My speculative investments made nearly zero the first 6 months, but had big gains in the 4th quarter. I made estimated payments in Q4, but only enough to get to 90% of taxes due. But apparently my accountant thinks I owe some penalties because the estimated payments weren't even throughout the year. How was I to know the last quarter was going to be a big gain, I don't know. Anyway, I guess it's better than if it was a big loss.

You may need a new accountant. As long as your estimated payments match your income by quarter, you're ok. Of course you probably should file Form 2210 and use the Annualized Installment method to confirm that . He'll earn his money filling out that form.

I'm hoping the penalty is a mistake and I'll get back a refund, but there seems to be a lot of fine print regarding my specific situation. I did look at Form 2210 and I wouldn't wish that upon my worst enemy. If the amount of withholding was sufficient, then no penalties would be due, but because they were estimated payments, I'd have to do the regular method and Schedule AI, which is likely to cost me more in time and money than the penalty. I made an extra payment for 2017 to avoid being in this situation next year. Hopefully the gains will be more consistent, or at least that they will be gains.

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Re: Did anything surprise you in your 2016 taxes?

Postby flamesabers » Tue Apr 18, 2017 3:37 pm

LiterallyIronic wrote:Our household income was $66,000. We paid over $5,000 in federal income tax. My brother-in-law's household income was $89,000. He paid only $500 in federal income tax. Both figures include the amount paid over the course of the year plus the amount paid in April (or minus the refund). Surprised me. But mostly angered me.


Does your brother-in-law have a ton of itemized deductions or something? I'm baffled as to how someone with a $89k income has an effective tax rate of 0.56%.

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Re: Did anything surprise you in your 2016 taxes?

Postby Globalviewer58 » Tue Apr 18, 2017 3:48 pm

Not a surprise but a tip for those who have foreign investment income. You really need to calculate both ways to know which is best in a given year.

Calculated my partner's Federal two ways - first processing the Foreign Investment Tax as a Credit against Federal Income Tax and then claiming as a deduction. She was better off taking the credit this year although the last several years was better off taking the deduction. Lowered the Federal bill by $2K.

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Re: Did anything surprise you in your 2016 taxes?

Postby LiterallyIronic » Tue Apr 18, 2017 3:56 pm

flamesabers wrote:
LiterallyIronic wrote:Our household income was $66,000. We paid over $5,000 in federal income tax. My brother-in-law's household income was $89,000. He paid only $500 in federal income tax. Both figures include the amount paid over the course of the year plus the amount paid in April (or minus the refund). Surprised me. But mostly angered me.


Does your brother-in-law have a ton of itemized deductions or something? I'm baffled as to how someone with a $89k income has an effective tax rate of 0.56%.


I know he pays a mortgage and I don't. I know he has three kids and we don't have any (as of 2016 tax year). I know his wife doesn't work and mine does. I know he donated a decent amount of money - probably at least $8,000. I know he got his "AGI" or "MAGI" or "taxable income" or "something" (I have no idea what those are or how they differ) down into the $30k range.

He told me, "Buy a house, it'll bring your taxes down." I replied, "How can I save for a house when I'm paying ten times the tax you are?"

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Re: Did anything surprise you in your 2016 taxes?

Postby pshonore » Tue Apr 18, 2017 4:10 pm

LiterallyIronic wrote:
flamesabers wrote:
LiterallyIronic wrote:Our household income was $66,000. We paid over $5,000 in federal income tax. My brother-in-law's household income was $89,000. He paid only $500 in federal income tax. Both figures include the amount paid over the course of the year plus the amount paid in April (or minus the refund). Surprised me. But mostly angered me.


Does your brother-in-law have a ton of itemized deductions or something? I'm baffled as to how someone with a $89k income has an effective tax rate of 0.56%.


I know he pays a mortgage and I don't. I know he has three kids and we don't have any (as of 2016 tax year). I know his wife doesn't work and mine does. I know he donated a decent amount of money - probably at least $8,000. I know he got his "AGI" or "MAGI" or "taxable income" or "something" (I have no idea what those are or how they differ) down into the $30k range.

He told me, "Buy a house, it'll bring your taxes down." I replied, "How can I save for a house when I'm paying ten times the tax you are?"

Those three kids could produce 6K in tax savings - three child tax credits at 1K each, and approx. 12k in personal exemptions (worth 3k) in the 25% tax bracket although it sounds like he's in the 15% bracket

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Re: Did anything surprise you in your 2016 taxes?

Postby flamesabers » Tue Apr 18, 2017 4:20 pm

Globalviewer58 wrote:Not a surprise but a tip for those who have foreign investment income. You really need to calculate both ways to know which is best in a given year.

Calculated my partner's Federal two ways - first processing the Foreign Investment Tax as a Credit against Federal Income Tax and then claiming as a deduction. She was better off taking the credit this year although the last several years was better off taking the deduction. Lowered the Federal bill by $2K.


Isn't a tax credit always preferable to a tax deduction? Tax credits reduce your tax liability dollar for dollar. Tax deductions merely reduce your amount of taxable income. Am I missing something here?

pshonore wrote:
LiterallyIronic wrote:
flamesabers wrote:
LiterallyIronic wrote:Our household income was $66,000. We paid over $5,000 in federal income tax. My brother-in-law's household income was $89,000. He paid only $500 in federal income tax. Both figures include the amount paid over the course of the year plus the amount paid in April (or minus the refund). Surprised me. But mostly angered me.


Does your brother-in-law have a ton of itemized deductions or something? I'm baffled as to how someone with a $89k income has an effective tax rate of 0.56%.


I know he pays a mortgage and I don't. I know he has three kids and we don't have any (as of 2016 tax year). I know his wife doesn't work and mine does. I know he donated a decent amount of money - probably at least $8,000. I know he got his "AGI" or "MAGI" or "taxable income" or "something" (I have no idea what those are or how they differ) down into the $30k range.

He told me, "Buy a house, it'll bring your taxes down." I replied, "How can I save for a house when I'm paying ten times the tax you are?"

Those three kids could produce 6K in tax savings - three child tax credits at 1K each, and approx. 12k in personal exemptions (worth 3k) in the 25% tax bracket although it sounds like he's in the 15% bracket


LiterallyIronic, even through your brother-in-law is getting a much better deal on federal taxes than you, he'll have to pay a lot more in insurance costs once his kids are old enough to drive.

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Re: Did anything surprise you in your 2016 taxes?

Postby triceratop » Tue Apr 18, 2017 5:36 pm

flamesabers wrote:
Globalviewer58 wrote:Not a surprise but a tip for those who have foreign investment income. You really need to calculate both ways to know which is best in a given year.

Calculated my partner's Federal two ways - first processing the Foreign Investment Tax as a Credit against Federal Income Tax and then claiming as a deduction. She was better off taking the credit this year although the last several years was better off taking the deduction. Lowered the Federal bill by $2K.


Isn't a tax credit always preferable to a tax deduction? Tax credits reduce your tax liability dollar for dollar. Tax deductions merely reduce your amount of taxable income. Am I missing something here?


Not always; tax deductions sometime make you eligible for certain additional tax credits. See the saver's credit for a great example. However, in general your intuition is correct.

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Re: Did anything surprise you in your 2016 taxes?

Postby sherwink » Tue Apr 18, 2017 5:41 pm

Nothing surprised me in the 2016 tax filing. Somethings disappointed me in the unnecessarily complicated tax formulas. If taxes were enormously simplified taxes would automatically become easier and fairer.

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Re: Did anything surprise you in your 2016 taxes?

Postby kolea » Tue Apr 18, 2017 5:59 pm

I expected to be in the 25% bracket and made pre-payments based on that. We spent less in 2016, so withdrew less than I estimated and ended up in the 15% bracket. All those pre-payments got refunded to me, plus some more. Nice surprise. But it will be short - we will be back in the 25% bracket in 4 years when I start SS.
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gscook3
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Re: Did anything surprise you in your 2016 taxes?

Postby gscook3 » Tue Apr 18, 2017 6:03 pm

Got married in late 2015, and i *thought* we had both changed our withholding to "Married, but withhold at higher single rate" - turns out only one of us did - the other was withholding at the standard Married rate, which meant the surprise of a hefty tax payment instead of a small refund this year.

Definitely not fun going through the screens on your tax software just seeing a big number get bigger, especially when you know it's due to your own carelessness.

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unclescrooge
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Re: Did anything surprise you in your 2016 taxes?

Postby unclescrooge » Tue Apr 18, 2017 6:11 pm

I was surprised by the size of my federal and state refunds. They were MASSIVE.

This was driven mainly by the large mortgage interest payments, the $20k in points I paid for my new-home-purchase mortgage (which were deducted and not amortized), huge amounts of property tax and state tax.

Of course, the state tax refund will be taxed next year but luckily household income will be lower due to wife not working for 2 months for maternity leave, and I'll get a huge deduction for installing solar.

Basically, my refund is paying for a new roof + solar panels. And these are providing a large deduction next year. :mrgreen:

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Mlm
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Re: Did anything surprise you in your 2016 taxes?

Postby Mlm » Tue Apr 18, 2017 6:24 pm

Small but nice surprise. I prepaid my fourth quarter real estate taxes to get the federal deduction. This unexpectedly threw me over the standard decuction on my State taxes which is something I have never been able to take advantage of before. $97 bucks :moneybag
Reality has a way of catching up with you

gloomydog
Posts: 124
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Re: Did anything surprise you in your 2016 taxes?

Postby gloomydog » Tue Apr 18, 2017 6:30 pm

I learned something new. This is our first year dealing with RSU, and I assumed initially I could just import all the numbers and type those in like I do for all other tax forms, but turns out your basis isn't actually written down for you despite being written in the W2 (why?!) Almost had a heart attack when I first saw the presumed amount owed, before I read the stuff more carefully. (Turbotax)

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Nearing_Destination
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Re: Did anything surprise you in your 2016 taxes?

Postby Nearing_Destination » Tue Apr 18, 2017 7:08 pm

TomatoTomahto wrote:
flamesabers wrote:For 2016's taxes I had to pay in for my federal taxes for the first time ever. Oddly enough, I only had to pay in $1. :o

The surprise of having to pay in for federal taxes (even for a trivial amount) motivated me to max out my 401k contributions this year so that I won't have to worry about getting hit with a bigger tax bill next year.

Yes, that dreaded $2 tax bill :D


But they are very strict about it-- you have to pay with a $2 bill and those Jefferson's are not as easily found as before ( hopefully no penalty, as those half cents are hard to find as well)

Elena
Posts: 69
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Re: Did anything surprise you in your 2016 taxes?

Postby Elena » Tue Apr 18, 2017 7:12 pm

triceratop wrote:I fill out my taxes by hand. No major surprises this year, but I made one error in tax planning. I tax gain harvested nearly to the top of the 15% tax bracket, so I paid no gains. But I didn't realize the California 8% bracket started so low so I paid a few dollars in that bracket. I should've maxed out the 6% tax bracket with gains and reserved the rest for 2017 when I can fill the 6% bracket again.

I think it cost me about $10. I canceled Spotify for two months to compensate for my error. :)

Punishment deserved!!!
:D

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Thrifty Femme
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Re: Did anything surprise you in your 2016 taxes?

Postby Thrifty Femme » Tue Apr 18, 2017 7:48 pm

We got a $15 refund from the Feds. It's the first time in about 8 years that we've haven't owed the Feds. I'm sure we'll owe again next year.

TIAX
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Re: Did anything surprise you in your 2016 taxes?

Postby TIAX » Tue Apr 18, 2017 8:10 pm

gscook3 wrote:Got married in late 2015, and i *thought* we had both changed our withholding to "Married, but withhold at higher single rate" - turns out only one of us did - the other was withholding at the standard Married rate, which meant the surprise of a hefty tax payment instead of a small refund this year.

Definitely not fun going through the screens on your tax software just seeing a big number get bigger, especially when you know it's due to your own carelessness.

Unless you're paying a large underpayment penalty, you should want to owe as much as possible.

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dodecahedron
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Re: Did anything surprise you in your 2016 taxes?

Postby dodecahedron » Tue Apr 18, 2017 8:13 pm

unclescrooge wrote:
Of course, the state tax refund will be taxed next year but luckily household income will be lower due to wife not working for 2 months for maternity leave, and I'll get a huge deduction for installing solar.

Basically, my refund is paying for a new roof + solar panels. And these are providing a large deduction next year. :mrgreen:


Small but important technical point: what you get for solar is NOT a tax deduction, it is a tax credit.

A tax credit is generally much more valuable than a tax deduction. A tax deduction of $X reduces your taxable income by $X and reduces your tax liability by some (less than 100%) percentage of $X. A tax credit of $X reduces your tax liability by $X. (Even better, the solar tax credit can be carried forward if you do not have enough tax liability to use it all in one year. By contrast, most tax deductions can't be carried forward if they can't be used in the current year. There are some noteworthy exceptions to this last rule, e.g., excess charitable deductions can be carried forward.)

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EyeYield
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Location: Extremistan

Re: Did anything surprise you in your 2016 taxes?

Postby EyeYield » Tue Apr 18, 2017 8:29 pm

Not really a surprise, because I knew it was coming, but thanks to the Coca-Cola Enterprises merger to form Coca-Cola European and the Baxalta/Shire merger, I had double my estimated income causing me to pay back my ACA subsidy.
Total state and federal owed, about $6000.
Ouch! I can rationalize that I'm just paying back was was "loaned" to me to pay my premiums, but still.....
Oh the unexpected joys of owning individual stocks. :oops:
Last edited by EyeYield on Tue Apr 18, 2017 10:01 pm, edited 1 time in total.
"The stock market is a giant distraction from the business of investing." - Jack Bogle

itstoomuch
Posts: 3783
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Re: Did anything surprise you in your 2016 taxes?

Postby itstoomuch » Tue Apr 18, 2017 8:37 pm

Wife's teeth. Her bite is now is as bad as her bark. Lots of medical deductions :oops: :annoyed :|
Ymmv :? :mrgreen:
Last edited by itstoomuch on Tue Apr 18, 2017 11:14 pm, edited 1 time in total.
4 buckets: SS+pension;defer'd GLWB VA & FI annty, by time & $$ laddered; Discretionary; Rental. Do OK on 2 bkts. LTCi. Own, not asset. Tax 25%. Early SS. FundingRatio (FR) >1.1 Age 67/70

oktax
Posts: 13
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Re: Did anything surprise you in your 2016 taxes?

Postby oktax » Tue Apr 18, 2017 9:04 pm

My wife and I are in the worst tax position we'll likely be in for the next 30+ years. We're early in our careers, renting, in aggressive student loan repayment mode, and don't have any passive income. I'm a tax lawyer, so it isn't necessarily a surprise that we aren't in a good tax position. But this was the first tax year since we got married that we've been living in the states and both worked. So the marriage penalty we had to deal with this year was a bit frustrating.

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House Blend
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Re: Did anything surprise you in your 2016 taxes?

Postby House Blend » Tue Apr 18, 2017 9:15 pm

triceratop wrote:
flamesabers wrote:
Globalviewer58 wrote:Not a surprise but a tip for those who have foreign investment income. You really need to calculate both ways to know which is best in a given year.

Calculated my partner's Federal two ways - first processing the Foreign Investment Tax as a Credit against Federal Income Tax and then claiming as a deduction. She was better off taking the credit this year although the last several years was better off taking the deduction. Lowered the Federal bill by $2K.


Isn't a tax credit always preferable to a tax deduction? Tax credits reduce your tax liability dollar for dollar. Tax deductions merely reduce your amount of taxable income. Am I missing something here?

Not always; tax deductions sometime make you eligible for certain additional tax credits. See the saver's credit for a great example. However, in general your intuition is correct.

The Saver's Credit, and any other credit tied to AGI, isn't relevant here. A Schedule A deduction for taxes paid isn't going to help with claiming these.

I'm with flamesabers here, and would like to know how it is that Globalviewer58 came out ahead by claiming foreign taxes as a deduction.

One way to have such a situation would be if your ability to claim the FTC is limited.

An easier scenario to invent is one in which the deduction and the credit have equal value--if either one reduces your tax liability to 0. (So the deduction would be preferable if it means not having to file Form 1116.)


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