I would have owed federal income tax but I contributed over $4000 to a deductible traditional IRA, took the student loan interest deduction, and the saver’s credit. I plan to take similar deductions and credits on my federal income taxes next year. I don’t feel bad about taking deductions and credits to reduce my federal income tax owed to $0. The following Learned Hand quote pretty much sums up my feelings on the subject.
“Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.”
As you earn more there is more available to lower your taxes. When I owned income property I was able to significantly defer my taxes.
Is this a great country or what? After considering all the deductions, adjustments, and other tax breaks available – and every taxpayer is certainly entitled to all they can legitimately enjoy – the so-called progressive tax code isn’t so progressive after all.
But I’m quite impressed that the blogger was able to contribute over $4000 to an IRA, make student loan payments, and also take the saver’s credit on a gross income that appears to be in te neighborhood of $10K to $15K.
There is probably some inside expense advantage here that most people don’t have – like maybe living with parents for almost free – but maybe not.
My total income was a little over $21,000 but my AGI was just over $15k. The student loan payments were very small as was the deduction. I was able to contribute $4000 by using my higher paying job in the first few months of 2013 to contribute to my 2012 IRA.
I lived in my van for a few months last year which kept my expenses down. I also lived with my mom for a couple of months. I paid the water and electric bill during that time and also had a lot of commuting so my expenses weren’t especially low by my standards during that time.
This is in reply to KrantCents. Being able to deduct expenses from blogging and mystery shopping helped to keep my taxable income down. There are lots of deductions available to reduce taxable income.
Paying taxes sucks, but the flip side is that the more taxes you pay, it means you’re making more money, so look at the bright side when that time comes 🙂
I will make more money this year but I think I will still have enough deductions and credits available that I won’t owe any federal income tax. We will see.
Nice job getting below the limit with those deductions! Any tax savings is great!
Thanks!
Saving is great, but at what expense? You lived in your car and with your mom for at least part of the year. Would you rather make $5,000 more and be able to live on your own?
I do live on my own. I lived in my van because I wanted to and I stayed with my mom for a couple months more for convenience than for saving money. I’d like to try van living again but I wouldn’t live with my mother again. An exception would be is she were unable to care for herself and needed my help.
Totally awesome you got to pay no Federal income taxes! I’ve been a fool for paying six figures a year in taxes for about a decade and am on a mission to pay no taxes as well.
Inspiring!
I’d rather earn a lot more money and have to pay some taxes. Or even better earn a lot more money and still not have to pay taxes.