Author Topic: Any negatives to lowering my tax bill  (Read 1884 times)

FIPurpose

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Any negatives to lowering my tax bill
« on: January 24, 2014, 09:56:26 PM »
So I'm currently doing my taxes in turbo tax. I'm on the main page with all the deduction options. After putting in about everything I know I can deduct I still owe about an additional $1000 in taxes. Now the wife and I are planning to buy a house in the future (in about a year or so). Now since it is still possible to add to an IRA this year (between my wife and I we probably have about $8000 before we hit the limit). And we have about $8000 hanging around in a savings account.

Since it is possible to withdrawl up to $20,000 for a home purchase between us, would it make sense to put the money into an IRA in a money market fund? Would that actually do me any good in the long run to put this temporarily into an IRA?

Pros:
I avoid paying an extra $1000 in taxes today.

Cons:
I pay more taxes next year?

Is there something I'm missing?

dragoncar

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Re: Any negatives to lowering my tax bill
« Reply #1 on: January 24, 2014, 10:07:34 PM »
If you know you are going to buy a house, I'd personally just keep the cash.  Anything else is hyper-optimizing, although I think you are right that it would work.

Cheddar Stacker

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Re: Any negatives to lowering my tax bill
« Reply #2 on: January 24, 2014, 10:14:06 PM »
Not worth it for a 1 year deferral in taxes, unless you have a bunch of penalties/interest for underpayment of 2013 taxes. That's not likely on only $1K balance due, but worth mentioning I think. Pay the $1K and keep the $7K for the house.

FIPurpose

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Re: Any negatives to lowering my tax bill
« Reply #3 on: January 24, 2014, 10:22:51 PM »
Thanks. For a moment I thought for a bit that I might save money, but I guess with my increase in pay this year, the chances of my taxes being lower is unlikely.

KingMe

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Re: Any negatives to lowering my tax bill
« Reply #4 on: January 25, 2014, 02:19:41 PM »
You may want to consider the advantages of a traditional or Roth IRA apart from this year's tax bill. If you're unable to make significant IRA contributions for 2013 in order to buy a house soon, when do you expect to be able to invest?