Well, I am saving the long weekend, next weekend, for financial chores and such. I will probably even do my taxes for the most part (will have most the info by then). I always file by Jan. 31 for refund; April 15 for taxes due. Of course, our tax situation is extremely simplistic. All of our investments are tax-deferred, so nothing to wait on there. I have no tax-deferred deductions from my paycheck, though if I did, I would still be able to figure out what my W-2 would say, I suppose. So, I usually start on the 1st, and go from there.

Anyway, out of curiosity, I plugged in my #s today. I knew how my W-2 would read - with only one more salary check to wait for this year. Interest income, mortgage, property taxes, medical expenses - easy peasy to estimate.

I came up with a rough estimate of owing $200. Will see! (That is $700 back from Feds and $900 due to state). So will probably file Federal in January and the state return in April. (Or to make it simple - may file when I get the Federal refund).

I usually go for pretty breakeven. The Fed refund is due to the "Making Work Pay" credit. My employer never adjusted my paycheck. Which reminds me, it will probably be adjusted in January.

The state taxes owed are due to the fact that our state taxes went up so much this year. Our total tax was almost DOUBLE last year. Of course, double of "not much" isn't so bad.

In the end, I will double my state withholding in 2010 (from $60 to $120 per month). My Fed withholding should go down just as much, for the new credit. So I Can breathe a sigh of relief that my taxes will not go up next year. It's all breakeven in the end. (Barring future tax law changes). Yes, I ignored 2009 California tax law changes - I just paid 100% last year's taxes to avoid penalty. I figured with the state issuing IOUs and such, why risk paying more than I have to? I didn't feel real motivated to pay in more.

The nitty gritty:

Compensation was about $90k (was a darn good year!)

Federal Taxable income about $45k.

Tax would be about $7k, but after child tax credits and the new working credit, total taxes were about $4k. Still, far more than we have paid most of this decade.

California taxable income was about $65k. Tax was about $1700.

How the heck do I manage so many tax breaks?

10% of my income is paid in the form of profit sharing. Basically, 10% goes into tax-deferred retirement funds. The reason my employer structures it this way is more tax breaks for him - more tax breaks for us. It's kind of like him paying me 10% more, and me deciding to put 10% into a 401k. Except I don't get to control it. He decides how much, and how to invest it. Otherwise, it is pretty similar to a 401k. Will roll it into an IRA eventually, when my employment ends.

We actually whittled down our mortgage interest by about $2k this year, with our refi. But still $14k easy in property taxes and mortgage interest. On top of that, the other biggie is our medical expenses - well over 7.5% of income - the portion over 7.5% is fully deductible. (Insurance premiums, medical bills, dental bills). About $4k deductible there. Plus state taxes and our minor charitable giving puts us to about $20k itemized.

Then, we get about $14k exemptions, for there being 4 of us.

& that is how I get my taxable income so low. It's not exactly planned. One-income with kids, is good for the taxes. I actually avoid things like HSAs and deductible IRAs, because our tax bracket is so low (no real benefit). We fund ROTHs instead.

Anyway, I was a little worried. Our mortgage interest went down, my income was up a few thousand over last year, and I knew our state tax breaks were disappearing. I am relieved that it looks like we made it rather break-even. $200 owing - I Can handle that! I think the new working credit saved our bacon this year.

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Next year we will actually have a LOT of medical bills. (Easily $6k more in deductions). I will probably just go with the year-end refund though. IT's just a one year thing - I don't need to get used to a "bigger paycheck." For such a one off thing, I think we will just go with the status quo.