BTW, it amazes me how little most of the middle class really appreciates the Bush Tax Cuts. (I mean, I am NOT a fan of the tax cuts, wondering what we will have to pay in the future to make it up, BUT I have to admit has helped our bottom line immensely). But it just scares me if people think these are high income taxes... The bar has been set really low and no one really seems to notice or remember they paid much more taxes in the 1990s. & the young generation never paid any more than this.

Anyway, I found this neat tool where you can look at the tax brackets from 2000 through 2008:

http://www.moneychimp.com/features/tax_brackets.htm

Look at 2000 vs. 2008

Don't forget generous child tax credits and capital gains rates, etc., etc., etc.

People have a short memory. & yeah, it is certainly harder to raise taxes. The future will be interesting.

--------------------------------

Anyway, doing tax planning for many clients I decided I should peek where we are at for the year.

& I have been asked many times IRL and around here what kind of tax voodoo I do to get our taxes so low. No voodoo. I am just not a huge fan of the income tax on a second income. The voodoo is living on one income. The kids and the house help too. We primarily invest in our ROTHs - so no taxable investments. It's all quite simple. I get the impression my friends think I am into questionable tax loopholes or something.

Our taxes look as so:

$77,000 Income (+2k over last year)
1,000 Interest (assume Same last year)
--------
78,000 AGI
-14,000 Exemptions (4 x $3500)
- 3,500 Medical ($9300 total, 3500 > 7.5% AGI)
- 4,500 Property Taxes
- 2,000 State income taxes
-12,000 Mortgage Interest
- 750 Charity
---------
41,250 Taxable Income
10% & 15% taxes applied
---------
$ 5,400 Total Tax before credits
- 2,000 Child Tax Credits (2)
--------
$ 3,400 Total Tax

We paid in $3300, so I think we did well.

Some items of note. 25% tax bracket does not kick in until about $65k of taxable income. SO, I could earn about $100k before we would start hitting the 25% tax bracket. (OR dh could earn $20k).

So um, yeah. We are well within the 15% tax bracket, for now.

Last 2 years we converted about $30k into ROTHs, so this year was calm and easy. But we wanted to convert them while we could at 15%.

Can't say what 2009 will have in store for us.

Anyway, my taxes also showed a $500 refund from the state. So, in the end looks like we'll come out ahead. I know the state is really into unnecessary withholding, to balance the books this year, so they must love us. But state is tricky and I just pay in a flat $100/month.

For 2009, assuming tax law remains the same. (Probably not a good assumption, but all I have to work with for now). Our mortgage interest will go down about $2k, with our refi. At the 15% tax bracket, this will up our taxes by about $300. For now, I think I will just leave my withholding as is. As long as we pay in 100% of last year's taxes, we will not be penalized if we owe. & our savings is getting on a better track. So I rather just owe. & anyway, it offsets the amount I expect back from the state. So it works out. Still rather breakeven.

BTW, I will file my taxes in January. Yes. I wait until 31st just to make sure I don't miss a 1099. But, for the most part, ready to file and get my state refund once January rolls around. I'll pay the IRS on April 14th.