health and taxes

walking alone in Milan (boulevard of broken dreams)

For some reason I decided I needed to finish our taxes this week.
Thanks to TurboTax I’ve been working in fits and starts, putting in information when I had a few free seconds.  I decided that I might end up fiddling around right up until April 15th, and with preparation for our move starting to take a little more time every day, I decided to finish taxes on Sunday.

Except for two unusual situations I would have finished sooner and written a post about something else – before I got obsessed with taxes. We had an investment in a publicly traded partnership that triggered a bunch of forms I had never seen before, and we had significant medical expenses in 2008.  How significant?  We had just over $10,000 in medical expenses in 2008.  Hopefully it is an outlier (my daughter Pumpkin was born last spring) but it’s a staggering figure when you consider that’s with a health insurance plan.

What’s even more staggering is that I’ve already pumped somewhere in the neighborhood of $5000 into health care this year…for almost nothing. We’ve had a few doctor and pediatrician visits, but not anywhere near enough to justify the outlay of cash so far.  I’ve continued to hold on to COBRA in hopes that I’ll start getting subsidized (thanks to the stimulus package) and partially because I didn’t want to change anything before we moved.  The word is that sometime in mid-April I should get the COBRA subsidy and it should be retroactive.  If so, fine – my health care costs will be tolerable for a while.  If not, I’ll have one heck of a fat deduction on my taxes next year.  As an unemployed freelancing writer 7.5% of my income (the threshold to clear before deducting medical expenses) won’t be tough to surmount.

My taxes are unpredictable from year to year – my income fluctuates, the whole New York/New Jersey mutual mugging is hard to understand and this year we’ll sell a house and move to another state (where, mercifully, I won’t need to pay state income taxes anymore).  I enter each tax season with more than a little trepidation, although I’m feeling quite confident about 2009 so far – at the rate I’m going my taxes should take a serious dip (which is not a bad thing, obviously).

So what’s the point? The point is that I sat down and figured out that once you take out medical expenses, taxes and all the little bits and pieces (Medicare taxes, etc.) I’m only taking home about 60% of my income.  And don’t forget about the stealth taxes like tunnel and bridge fees (it costs $16 in fees just to drive 42 miles, round-trip, to visit my in-laws).  When it’s all tallied up, I would imagine that about 50% of my income is out the window before I bring it home.

I am not making an anti-tax rant, although I could stop and consider where that tax money is going (protracted wars, bailouts for bonuses, interest payments on the national debt) and get angry. I did some rough calculations and realized that my choice of a place to live (New Jersey) and work (New York City) and profession (six-figure consultant) and other lifestyle choices (expensive health care, commutes, etc.) don’t give me much return on value.  For the sake of argument, if I’m making $100,000 and bringing home $50,000, I’m in a bit of a squeeze.

On the one hand, I’m impressed with myself – given tight numbers like that, I still managed to max out my 401(k), buy a new minivan for cash and have a bit left over. On the other hand, I keep wondering if I wouldn’t be better off making $60,000 and paying $15,000 in taxes (and probably less) in a less metropolitan area.

Nothing new, right?  Maybe. After a lot of debate and tension – and still with no ironclad source of income – my family and I are going to see if that’s true.  Will hacking our income and cost of living down be paid off by – ironically – actually having more take-home income?  It will depend on many things – whether we can generate enough income to live comfortably, whether we can reduce temptations to upsize our house and hoping that we can get health insurance under control.  But after struggling through another cold week, taking another lead pipe to the back of my head struggling through three complicated tax returns and watching my income from a profession I don’t really like drain away, I’m ready to give it a shot.  I wouldn’t say it’s a sign, but doing my complicated taxes while looking forward to a long week of rain and cold is a push in the right direction.  Sometimes external forces conspire to simplify an internal decision.

photo credit: Gret@Lorenz

PS I was interviewed over at Living Almost Large: click on over!