04-11-06 - 2


I finally did my taxes, and I think I discovered a weird anomaly. Of course, the tax code is fully of loop-holes and there's a huge industry devoted to exploiting them, but this one is just silly and simple. You can deduct your state income tax from your federal income. Okay, that seems simple enough right? Well, the amount you deduct is the amount that was deducted from your income as reported on your W2, *NOT* the actual amount you end up paying in state income tax. What that means is that if you overpay state taxes during the year, you will get a refund from the state at the end, and get a larger deduction on your federal tax. Kim rightly points out that this is not a good dodge, because your state refund counts as income and gets taxed on your next year's federal return.

No comments:

old rants