Small Raise, Big Difference
I received a small pay raise of ~3% that will increase my bi-wkly net income by ~$80. I refer to it as “small” because I’m used to double digit raises, but this salary adjustment wasn’t tied to performance, so I can’t complain. However, I am looking forward to my first semi-annual and annual performance review like a kid on his way to the toy store.
Now that I have a little extra change, what am I going to do with it?
1. Tax Adjustment: This small raise forced me to do something that I’ve been putting off since July - oh just call me the Procrastinating Queen Bee. I’ve been meaning to adjust my tax exemptions because I’ve had zero rental income since June and more business expenses than anticipated. So the first thing I did was increase my federal exemptions to 7 [I'm not a tax professional so please don't ask me how many exemptions you should claim].
2. Savings: I also reinstated a payroll allotment that was previously canceled when I achieved my eFund goal. I was supposed to redirect all extra income to my non-retirement investment goal. Remember that $5,000? Unfortunately, this summer alone, I’ve spent almost the same amount on rental property expenses. Needless to say, I probably won’t reach that goal this year. *shrug* It’s ok though. I’ll keep my eye on the prize, but I can’t worry about it right now. I’m just thankful I had the money to cover ALL rental property expenses without incurring debt. Therefore, the reinstated allotment will deposit $100 bi-wkly to a savings account that is earmarked for future rental property expenses.
Based on the above, I expect my bi-wkly net income to remain the same as pre-raise. “Every little bit helps” has proven true in this situation. The small raise made a big difference because it will help me prepare for the financial unknown(s) associated with this rental property.
Wish it could help me deal with these psychos submitting rental applications. Pure comedy! LOL
~*~*~*~*~*~Work to achieve, not to acquire.
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This blog is the story of my life...a single mom who worked her way from nothing to financial freedom. Subscribe here and follow the rest of my journey.
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Hi SM! I choked on my coffee when I read you changed your exemptions to 7. That seems a bit to far out for me. Generally, I would take:
1. for you
2 - for you, head of household and one job
3 for baby girl
4 for having a home (that you are deducting interest and taxes) - in this case rental.
At the most - 5 for closer calculations. I hope you are right and I am wrong though - I would hate to see you getting clobbered by a huge tax bill.
YOU follow the “guidelines.” I plan for my “personal” situation. In my 15+ working years, I’ve NEVER had a “huge” tax bill. My refund (or bill) is usually a few hundred dollars. [-SM]
LOL.. I ain’t mad atcha Gina.. I claim 9 all year and ALWAYS get money back.. I need my money now.. no interest free loan with uncle sammy for me!
Like you I do the same when I get an “increase” or a “raise”. I know what it takes for me to live comfortably and I have been able to maintain that.. the extra goes into either my retirement a/c or savings..
First off - Congrats on the raise!! I don’t know how you do it, but if you could send some good raise vibes my way LOL!
Second - I know NOTHING about deductions. I’m too chicken to claim anything more than 1 (yea yea, shame on me!) b/c I live in one state and work in another. NY taxes are the devil, I swear. I’m doing it all based on play-by-ear. If I get money back this year, then I know to up the deductions. If i gotta pay (which i’ll probably have to pay NJ as they don’t take it out of my pay…I don’t even know if they’re supposed to do that in the first place!), then I know to stay put. All a matter of time, I say.
Hmmm, you all here good and honest people. Up until last year I was claiming 13 (14 and up they have to inform IRS). Well, it worked for me, because my taxable bonus would take care of any tax liability I had and plus I claimed business expenses, medical etc. I received $16 federal refund for 2007
, however during the year I was comortable that I would meet my oblications.
This year I claimed 10, will see what happens-I have a good friend who does my taxes (even though I am an accountant myself funny right?) and he is pretty good at finding business expenses that I did not even know I can write off.
The most I’ve ever claimed was 10. Anything more than that, my employer requires a form. So I always keep it under 10. My refunds are usually less than $300, just the way I like it. [-SM]
Sorry, it should have read obligations not oblications
Thanks for reminding me - I need to check out my withholding.
The tax witholding calculator on the IRS website is a handy tool for determining the number of expemptions one should claim.
I’m with you with the weirdo rental applications and everything. This year, I’ve seen a close relative really struggle with finding quality tenants after getting her home trashed by the last one. I don’t think I am interested in purchasing RE to rent (or cut out for it) after seeing the hardships she’s been through with it. Looking into REIT’s instead.
Glad your back and now I want to go to Hawaii!
I don’t blame you for increasing your exemptions. I would much rather pay a small amount or get a small refund than let the government use my money for free all year. So many people think of their tax refund as a windfall but fail to realize that they could have had the money in every paycheck by adjusting their witholding.
Renters are not the only nuts out there, i just moved from a home I’d rented for 2.5 years. The landlord seemed to think that the property was perfect when I moved in and tried to deduct all kinds of crazy things saying she “didn’t remember” those things being damaged when I moved in. I had to remind her that she:
a. Didn’t remember that the slab was cracked when I was dealing with 2″ of water on the floor during our rains last January. During this time I was supposed to be in bed with a fever of 104 and had to get up every hour to shop vac the water off the floor. Her handyman reminded her that he had tried to seal this crack 3x in the 2 years prior to my moving in.
b. Didn’t remember that I took pictures when I moved in and guess what, all of the items she was complaining about were there in living color.
Always take pictures, have them developed/printed immediately and mail two sets to yourself in two envelopes. Keep the envelopes sealed and in a safe place. The postmark will establish in court when the photos were taken. I opened one for the landlord (you should have seen her face) and I still have one sealed in case we end up in court.
Sounds like a bunch of headache for nothing.
I simply use a move in/out inspection checklist with side-by-side columns. I do a walk through WITH the tenants when they take possession, we note everything we see, and we both sign. Then, I use the same form when they move out.
As for pictures, my digital camera puts the date on them for me.
No drama. No misunderstanding. [-SM]
*scratches head*
i think i need to get that Taxes for Dummies book. i still don’t get this stuff. i usually claim one and my refund comes out to less than a thousand. psychologically it feels good, but i know the logical side of me is slapping me on the back of my head lol.
I, too, adjust my witholdings during the year. I usually do it for several months but change it back before my last paycheck of the year. I still get a refund.
Not being a parent, I take 0 allowances. After 401k contributions, my net pay is only 42% of my gross, and on top of that, the Feds and the State always want a few thousand more at tax time! There’s nothing more I can do to lower my tax bill; I contribute the most I’m allowed to my 401k. Being single, I tired of being clobbered by taxes! I just hope Obama doesn’t get in (for a lot of reasons other than this), or it will be a lot worse, and I don’t make a big salary.