Tax question or how do I reduce my taxes

[b4u2]

I am curious about our taxes. Last (2012) year we paid 20k to 30k and got 7k back (2013). This year (2014) I am guessing about the same refund back. I recently adjusted our withholding to lower the refund for 2015. Am I missing something to lower our taxes? Is this something I just have to deal with until I have my debt paid off? I have a lot of money, even after refund, going to taxes that could be paying my debt down or increasing my net worth. Just curious if there are options. I am currently putting 6% in 401k. My wife does not have any retirement options available through her employer.

I have a journal here if anyone is curious about my finances.  https://forum.mrmoneymustache.com/journals/b4u2-journal-it's-ugly/

[stevesteve]

It's pretty unlikely.  You could reduce your taxes by putting more into your 401(k) but I'm not sure you can do that given your loads of debt.  Personally, I think your Discover card at 20.99% and your car loans are worse than your taxes.

Good luck!

[willn]

Not seeing your tax return, but assuming you have competent tax help or knowledge, upping the 401k is the only obvious thing.  But you've got a lot of debt so until you can find a way to knock down all those debts I'm not seeing it.  If I were you I'd sell the Harley and trailer, like yesterday, and cancel DirectTV.  Remember this is only temporary and there is no toy like a toy that's been paid for in cash, which, if you get rid of all that debt, you'll have plenty leftover to save, both in 401k, and for a new toy down the road.

[AccidentalMiser]

Are you itemizing deductions?  Your numbers don't add up to me after looking at your journal.

Plug your numbers in here and see what you come up with, I guessed at your situation based on your journal entries and it doesn't seem  you should be paying 13k in taxes:

https://turbotax.intuit.com/tax-tools/calculators/taxcaster/

[shuffler]

To add to other's replies ...

The main ways I know of to reduce one's tax burden are to put money aside for specific (long-term) purposes.  401ks go to retirement.  IRAs go to retirement.  HSAs go to health-costs.  529s go to education.  Etc.

I think you're unlikely to find a way of reducing your tax burden that allows you to simply "keep more" of the money while still being able to use it for whatever your want, like your debt.  The government (and society) just isn't interested in letting you keep more of that tax money so that you can pay down your Harley loan.

You're in a debt emergency, like others have said.  I would recommend you just keep putting your available money towards that debt.

The good news is that it's a virtuous cycle, and it can lead to tax-savings, if that's what you want.  As you pay down your debt, you'll owe less interest, and will have more money available.  You can then decide to use that money to pay even more down on the debt, or to contribute more to your tax-advantaged accounts (your 401k, or IRAs for both you and your spouse).  If you do choose to contribute more to those tax-advantaged accounts, then your tax bill will be lower.

[b4u2]

I'll have to get exact numbers (taxact won't let me look at my old ones unless I pay), I have paper copies of everything.

I was just asking if I should put more into my 401k thereby reducing my taxes or wait until my debt is gone.

[shuffler]

I was just asking if I should put more into my 401k thereby reducing my taxes or wait until my debt is gone.

The typical advice I've seen (and endorse) is prioritized something like this:

1. Build a small emergency fund.  (Maybe 1 month of expenses?)
2. Put just enough in your 401k to get your employer's match.  (Free money!)
3. Pay your hair-on-fire debt.  (CCs with a high rate, PMI, car loans, etc.)
4. Grow your emergency fund to a point your feel comfortable.  (3mo?  6mo?)
5. Increase your tax-advantaged savings.  (401k, IRA, HSA, 529, etc.)

So in your case I would recommend paying your debt first, rather than increasing your 401k contributions.
Once the debt is under control, then take that same debt-paying money and immediately use it to increase the 401k contributions.