Buying a house entails many new problems to solve, things to remember and lessons to learn.
We've had to adjust our thinking on tax deductions, for instance. We do tend to give when friends are fundraising and definitely donate a good bit to Goodwill (especially with the move). Keeping track of these receipts is something I need to start actively working on.
Since we bought our house at the end of October, we didn't pay enough interest to do anything but the standard deduction in 2007, but this year we definitely will be itemizing. I think you can still deduct charitable contributions without itemizing, but to be perfectly honest, we've never bothered. I feel lucky that my returns make it out each year by April 15. Part of the reason behind this is that because of investments, my returns are pretty complicated without adding in other stuff. Part of us acting like grownups is taking charge of the tax situation.
I noticed on our July mortgage statement how much of our payments were for interest through June--I figure doubling this number is an on-the-spot workaround to estimate how much we would pay in interest this year. I know July - December, the interest portion of the payment will go down a tiny bit each month, but I just needed a quick figure.
With that quick figure, I realized that we're only about a thousand and change over the amount of the standard deduction. If I'm thinking about this correctly, that means we'll only get a few years at the beginning of our mortgage where it makes sense to itemize for the deduction on interest. While this means that I'm probably borrowing somewhat responsibly, I was a little disappointed, tax deductions on mortgage interest are mentioned everywhere. Since we have no kids, no student loans and don't pay a lot for things like ad valorums on our cars, itemizing might not make sense for us after a few years in the house. I need to analyze this more in depth, and account for charity and other possible deductions, but wow, talk about surprising!
Check tax changes for 2008 here
I'm going to make it a short-term goal to create a system to track charitable giving, possibly incorporating into my excel budget workbook (which includes the budget, a worksheet tracking each month, and the budgeting schedule where I assign bills to pay periods. I'm already working on adding a net worth section to the monthly sheets, at least for now while we are still trying to figure everything out.
Starting with simple tools and making them progressively more information rich has been working very well for me.
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