2023 Taxes Final Look
Norm Spivey Our 2023 return is filed! Despite my initially positive assessment earlier this year, I discovered several oversights in my tax preparation right up until hitting send. Bottom line, I’m better than I used to be, but it’s abundantly clear that I need the advice of a professional before tax prep season starts.
It all comes down to detailed tax planning. We aren’t doing it well and it shows. Sure, I’ve got the big pieces, but seems like I learn a new intricacy every time I look at a return! Proper tax planning requires the aid of a trained professional, there are just too many details for the average joe or jane to be familiar with.
With that, I will share three more lessons learned about taxes this year in addition to the three shared earlier this year. I am getting a little tired of learning the hard way!
There is a limit to the primary residence mortgage interest deduction. 2023 was unique for us in that we received three 1098s for our primary residence mortgage interest. One for the home we lived in until August and two for our new home. We received two 1098s for our new home due to our lender selling the loan almost immediately after closing.
Initially when I punched all that mortgage interest and points into my tax software, it made for a very nice, itemized deduction. However, after my tax software updated and asked more questions, it revealed there was a limit to the mortgage interest I could deduct. Bottom line, this catch made our tax bill go up by $2500!
Still a dependent. Last year our 19-year-old son worked nearly the whole year. Even though I listed him as a dependent in 2022 and prepared to do so for 2023 I didn’t notice any appreciable change to our taxes. I assumed his dependent days were over at least for tax purposes.
So, I was very proud to sit down with him over spring break and help him prepare his first tax return. I didn’t think twice when I instructed him to check that no one claims him as a dependent.
Turns out there was a benefit to claiming him on our return! When I removed him from our return our child tax credit went down by $500! It was too late to change as he had already filed his return. Although the net loss to the family was only $100 (our son was refunded $400 in state and federal taxes), I hate surprises!
Estimated tax payments. Although I am still proud that I correctly determined the capital gains tax and depreciation recapture on the sale of one of our rentals in 3rd Quarter 2023, I did not get our quarterly estimated tax payments for our other income correct. As a result, I am paying a small fine for underpayment yet again this year. Money wasted!
I am not sure our tax bill can ever be estimated accurately as it seems each tax year brings a new twist. Although I hate giving the government interest free loans, my strategy in 2024 will be to robustly overpay quarterly estimated taxes. This should mean a refund next year and no more fines! The first estimated tax payment for 2024 is already due soon.
The bottom line is that when one reaches the stage in life where their financial interests get complex, it’s time to seek the help of a tax pro. While I know this to be a truth, in my stubborn do it yourself fashion I’m going to give it one more attempt to get it right in 2024!
Looking for a good how-to on wealth building? Check out my book, Millionaire on a Worker’s Budget: Five Financial Truth’s to Build Wealth on sale now at Amazon!
Interested in rental property investing? Look for Collect Rent, Don’t Pay It: A Beginner’s Guide to Rental Property Investing on Amazon to learn how our family turned rental property investing into a successful side hustle!
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