Everything I Paid in Taxes
I finally filed my taxes — thanks, TaxAct! — so now it’s time to tell you how much I earned, how much I owed, and what kind of refund I’m getting.
Last year, I outlined everything I paid in taxes. This year, I’ll compare 2016 and 2017 tax information side-by-side.
|Business income minus loss||$77,177||$54,430|
|Adjusted gross income||$68,836||$41,580|
|Taxable income after deductions/exemptions||$58,486||$31,180|
|Total federal tax owed||$21,295||$11,889|
|Federal estimated tax payments||$19,500||$15,500|
|Estimated tax underpayment penalty||$29||0|
|Amount I owed||$1,824||$0|
|Total state tax owed||$0 (since Washington State has no income tax)||$185 (since I only lived in Iowa for 31 days in 2017)|
|State estimated tax payments||$0||$252|
For the past several years I’ve calculated my estimated tax payments on the basis of “what percentage of my gross income went to taxes last year,” and it’s interesting to do the math and learn that 24 percent of my gross income went towards federal taxes in 2016, but only 18 percent of my gross income went towards federal taxes in 2017.
I had $10,885 worth of business expenses in 2016 and $11,794 in 2017, which made a tiny bit of difference; I also put $5,500 in my traditional IRA this year, which helped reduce my tax burden. However, the biggest factor here is that I earned $21,838 less (gross) in 2017 than I did in 2016. I’m betting my 2018 income will look a lot like my 2017 income, so does that mean I should reduce the amount of money I set aside for estimated taxes?
Or should I keep setting aside 25 percent for federal and 5 percent for state and look forward to the possibility of another refund? It was really, really nice to get a refund this year — my first refund since I started freelancing — and I am already thinking of what I’ll do with this miniature windfall THAT I KNOW ISN’T REALLY A WINDFALL, IT’S A LOAN I GAVE TO THE GOVERNMENT, BUT I DON’T CARE.
I’ll go through my plans for this tax refund next week — unsurprisingly, they involve my brokerage account — as well as my theory that maybe I should set aside less money for estimated taxes this year but put the difference between 25 percent and whatever percentage I end up choosing in my brokerage account so it’ll be there (with a decent rate of return, assuming the market doesn’t collapse) if it turns out I underpaid my taxes in 2018.
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