I love numbers, love details, and love saving money, so I’ve always been interested in income taxes. I know I’m a bit of an oddball in that way, though. In case you’re not as nerdy as me, I thought I’d write about some of the reasons why I think you should care about the fascinating topic of income taxes, too.
- You have to pay them anyway, so you may as well pay as little as possible. Benjamin Franklin is often quoted as saying, “In this world, nothing can be certain, except death and taxes.” It’s true. Despite what your shady uncle might have told you, we all have to pay income taxes. Of course, there are plenty of ways to pay LESS of them and I feel that we should all do our best to pay NO MORE than our fair share!
- Tax benefits could help you pay for child care, education, medical expenses, and home ownership. There are so many tax benefits out there that most people aren’t aware of. Taking full advantage of all the tax benefits available to you could allow your family to do some of the things you’ve wanted to do like go back to school or buy a home.
- Filing your taxes properly can help avoid additional fees. You think bank fees are bad? Try not paying your taxes and watch how the fees stack up! It might take the IRS a year or two to catch up with you, but they probably will, and as the largest collection agency in the world, they will get their money.
- Tax deductions could help you do more good in the world. Some people feel that claiming charitable contributions on your tax return diminishes the selfless act of giving by taking some gain from it. My view is that claiming charitable giving allows a person to give more! If you give $100 and that reduces your taxes by $30, you can now give another $30 to the charity. Call me crazy, but I’d rather have the $130 to give! Did you know that you can also deduct the miles you drive when you volunteer? That might help to offset the personal cost of volunteering and help you to volunteer more.
- A tax refund means you gave the government a free loan for a year. Remember that shady uncle I mentioned? Imagine if he suggested on New Year’s Eve that he had a great suggestion for how to meet your resolution of saving more money in the coming year. Just give the government $200/month of your money every month for the whole year and then the following February, the government will give $2,400 of your money back to you, with no additional interest. During the year, if you need that money, there’s no way to get it until the next year and the government can do whatever it wants to with the money during the year. Sound good? No? Well, that’s what a tax refund is! Your goal should be to NOT get a tax refund and if you’d like to save money, do it in a more sensible way.
I will be writing much more about taxes in the future and getting into more details, but I hope I’ve convinced you that it’s a topic at least worth learning a bit more about!