Taxes will hurt next year?

My HR Blockhead said I'll recover about $200 less next year. Wrong. I won't need him.

 

For the record there are other ways to get tax deductions other then just per diem and the standard deductions. I'm not going to go any deeper because this is WAY OUTSIDE the purpose of this website. However over my active years I saved and invested a lot of money. My last 10 years I almost maxed out my tax deferred accounts. I have NO trust in the US Social Security system and I do not believe it will be solvent much longer. There were times I might wear a pair of shoes so long I almost wore a hole in them. Just saying!!

 

That's right ! I qualify for a $400,000 house (so they say)... I own a $120,000 house.
It's nice, and it's PLENTY.
I don't care what anyone thinks.

I also drive a 24yr old pickup truck.
It sits 98% of the time.

Lots of people I know say.. "Why don't you buy a new pickup and get rid of that heap?".
Me.. "because I prefer that $600/mo in my pocket".

 

Drive that pickup until it wont move anymore... then sell it off scrap. Life is better without financial stress.

 

I would suggest you do not engage in any per diem payroll modification system if you have any sort of major deductions other than per diem.

My first year driving, I used a per diem payroll plan, and paid money back to the government.

My second year, I did the per diem myself at the end of the year, and got a LOT of money back.

Why the difference? My mortgage. In my first year, I had to take standard deduction because my mortgage interest was just short of the standard deduction, and the per diem plan kept me from adding per diem to the mortgage expenses.

In my second year, mortgage + per diem = $$$.

Next year things will be different, but not so different that two large deductibles added together wont be worth working with.

 

I'm a little confused about what you're saying. Sounds like one of us is mistaken about how things can work for TY 2018. What are you proposing to add to mortgage interest deduction?

 

I may be mistaken about how things will work next year. I'm no tax guru, but here's my take.

If they haven't entirely removed per diem, and I do not think they have, then you can get $61 per day on the road for a deduction. If you have a mortgage, a spouse, and no kids, and file married, then $61 per day, say 300 days a year, will add up to about 18k - less than the standard married filing together deduction of 24k.

But if you have a mortgage as well, and pay, say, 12k interest in a year, and have another 10k in retirement and other types of deductions, then you won't have enough deductions (22k) to get you out of the standard deduction alone.

If you allow your company to do a pretax deduction of per diem, your per diem wages will not appear on your tax forms AT ALL. So, if you made 70k and had 18k of per diem removed, your end of year income will only show 52k. You will not have a large enough mortgage to itemize beyond the standard 24k deduction, even with one dependent, if your spouse does not work, so your taxable income will be 28k.

If you take the tax hit during the year on the per diem, and itemize it with your mortgage and other deductions at the end of the year, that 70k taxable income will become 70k - 18k - 12k - 10k = 30k

Now, that sounds like a benefit, right? Your taxable income is actually 2k less if you allow your company to do pre-tax per diem in the situation I described. However, your actual total reported income will be 18k per year less than it actually was, because pretax per diem is not included in W2 data at all. You made 70k, but the banks, government, and creditors only see 52k.

This can harm your creditworthiness. Creditors care about your total income!

In addition, if you are the sort of person who likes getting a nice check back from the government to pay off Christmas bills, then your able to get a lot more back from the government if you pay taxes on 70k income, through the year, then file 30k taxable income, as opposed to paying taxes on 52k and file 28k taxable income.

If you like to keep your money close all year, and pay as little taxes as possible, then you might want to take a hit on your creditworthiness to keep more of your money during the year.

Different people will have different scenarios. Per diem can impact your finances in several ways.

 

WTF what new tax laws? Ok screw it o
I'm going company thanks man

 

Only if you let it. Like I said in another comment. Keep you check stubs. Most companies keep a year to date running total on the check stubs. You can also get notarized statements from payroll if this becomes a problem. I hate the per diem, i'm not trying to defend it in anyway. I'm just trying to correct some misunderstandings. Also for the record what effects your credit worthlessness more is your income/debt ratio. I have seen people turned down for a home loan or approved but at a much higher interest rate because this ratio was over 40%. You get all this information together and sit down with a loan officer. Take your last 3 years 1040s and W2's along with check stubs etc etc. The loan officer will sit and figure your ratio and if you are OK in most cases you are approved.