Introducing Tax Tantrum Tuesdays!

Disclaimer: This entry is long. My apologies beforehand. In my defense, it's kind of a tantrum.

Everyone I know has asked me a tax question at least once. It is only right that taxes have a very special place in this blog. I have named that very special place "Tax Tantrum Tuesdays."

I often attempt to convince everyone that income taxes are much, much more simple than people think. Regardless of me saying that over and over again everyone refuses to even want to attempt to bother with them. I think this is for one of two reasons:

1) The IRS has instilled some SERIOUS fear, or
2) These people just think I'm a flat out liar. <-- which is quite offensive

 I will admit, paying income tax is less than fun, but if you can think of the tax impact a financial decision may have before you make that decision, it's a great feeling. And you wouldn't realize how taxes can motivate you to do some really positive things.

For example...I resolved that this year I will tithe 10% of my take home pay to my church. Now previously I'd been tithing but definitely not 10%. *bbm embarrassed emoticon*  Let's say I take home $60k after tax every year. Tithing would require $6k from me over the course of a year (that's $500 a month...that's more than my car note).  

Now I know I deserve a slap on the wrist for even fixing my mouth to complain about how much I have to be tithing...but let's be real, I went from borrowing a dollar or two from my momma to throw in the collection plate, to putting in $10 or $20 of my own money, to writing a $50 check when I was feelin' myself to...$500 a month?! Lord, give me the strength. By the way, this is still a hypothetical.

But thanks to the wonderful world of taxes, I know that if I am able to itemize, everything I tithe to the church is tax deductible as a charitable contribution, as long as my church is a non-profit. Yes, yes, I know...God himself should be reason enough for me to want to give...I'm really showin' the heathen in me today. Sorry.

While this is in no way my entire motivation for tithing...it's definitely a great motivator. Especially when the little devil on my left shoulder tries to convince me in September that I can skip one month of my tithing commitment to go on a trip to Vegas with the girls.

Back to charitable contributions...I have noticed that they are by far the #1 misunderstood deduction. The charities that convince you to give lots-o-$$$ because it is tax deductible usually don't remind you that charitable contributions are only tax deductible if you itemize. What in the world is itemizing??? When you file your taxes you are able to take a standard deduction (which is $5,700 in 2010, set by the government and raised for inflation every year) OR you can itemize.

Itemizing, in the most simple terms possible, means that you add up a bunch of special deductions outlined by the IRS - charitable contributions being one of them, home loan interest and property taxes being two other very common ones - and if the total of all these deductions is greater than the standard deduction (which is $5,700) you can itemize. Then and only then do charitable contributions mean anything for you and your taxes.


So back to my example, if I give $6k (10% of my yearly take home pay), I can itemize (because $6,000 is greater than $5,700). Believe me, that seemed obvious but to someone it wasn't. This allows me to take advantage of other fun itemized deductions that may result in even more tax savings but since I'm getting a little long winded with this one...I'll save those fun tax facts for another Tax Tantrum Tuesday...