Daley Ponderings

I haven't looked at how much time it took us to do taxes this year - I thought we were doing pretty well, time-wise, until we blew 8 hours or so today finishing them off (or is it them finishing us off, I'm not sure which...)

I noticed a number of places where the strange, complicated math formulas to figure out different values seem to be kind of odd (ie. not just complicated, but don't calculate in the intuitive way for people at different incomes, etc.)  The child credit is biased against self-employed people for some reason, where you can hit a cap relatively quickly, where if you work at a regular company, the cap is much higher (and at least for one guy (with a relatively low salary as a teacher with lots of kids) I asked, impossible to hit - he actually didn't know there was a cap).

There is also a minimum to getting the child credit, which I hadn't realized.  Once you have three kids, then that limit is mostly removed (though you have to work at the calculations to figure out how much you actually get), but with only one or two kids, you can actually earn too little and not get any tax credits for your children.  One could argue that if you are earning small amounts of money (or at least have a small adjusted gross income) that perhaps you can't afford lots of kids, and so shouldn't have the tax credit to motivate you, but I don't know how much people think about the tax credit when thinking about having another child or not.

Another interesting thing that happened this year, though I suspect it is mostly our "fault" due to not giving as much, is that though we earned a little over half what we earned last year, the actual tax rate is higher this year due to the self-employment chunk being bigger.  Last year, we were in the 15% bracket, and "actual" taxes were 9%.  This year, we're in the 10% bracket, but actual taxes are 13%.  I am defining "actual tax" as taxes paid divided by gross income.  (actually, I didn't do the calculation this year, taxact happened to point out that I was paying a higher tax rate than last year, I guess just to cheer me up)  But, the numbers sound right for last year, when I did do that calculation, and I'm pretty sure I used straight gross income.

TaxAct also pointed out that 13% of my taxes went to pay for other people's social security and medicare, etc.  9% went towards the US defense fund.  And then the rest of the categories (probably about 8) were all small percentages.  Just gives you a warm, fuzzy  feeling, doesn't it?