Tax Day Reflections: AGI = Adios, Good Income

by JT McGee

So today’s tax day.

In typical fashion, I’m going for a buzzer-beater. I like filing on the last possible day, since I almost always owe at the end of the year.

Here’s what’s on my mind as I look at my 1040:

  • AGI is a painful reminder of spending – The year 2012 was full of lifestyle creep. While I had a few less than ordinary expenses that I hadn’t expected, my year-end AGI serves as a reminder that lifestyle creep needs to be kept to a minimum. I spent pretty heavily last summer, and road trips add up. The year 2013 will be no better for big spending. I have to pay for basically 1.5 years of school this year.
  • I’m doing okay for a college kid – The economy isn’t as strong as everyone would like for it to be. I need to be more thankful for what I have. I’m not starving, not broke, and I don’t owe a dime to Sally Mae or any of her cohorts. That’s worth something. In general, 20-somethings are in a world of hurt, with student loan delinquencies now over 35% for people under 30 years old. I need to be more aware of the comforts and conveniences I have because it’s never been harder for people my age. Whether its from some supreme being or just dumb luck, I’ll take it. What I cannot do is take it for granted.

A special thanks goes out to Dan at DarwinsMoney and ETFBase, Larry at InvestorJunkie, Corey at 20sFinances, and Robert at TheCollegeInvestor for allowing me the opportunity to write about the markets and finance on their sites. Also, a big thanks to the clients of my non-blogging endeavors.

  • I had dividend income? – I generally stay away from dividend-paying stocks. I’m not a fan of dividends, seeing as I think they are more likely to lead to fairly-priced securities than underpriced securities. I had dividend income for the first time that I can remember in a long time. Weird. I think the bulk of it was from a one-time special dividends at year-end 2012.
  • W-2 income would be nice – W-2 income is worth the world when you don’t have it. After graduation I look forward to any amount of W-2 income because it’s so undeniably important for buying a home or making big investment moves, like purchasing investment real estate. Ideally, I’d have both W-2 and Schedule C income. A financially-motivated friend of mine just secured a steady job. We have similar goals and financial motivations. I can see us working together on some good real estate purchases in the future.

What about you? Did you glean any new insight from your tax documents?

{ 4 comments… read them below or add one }

Jonathan April 16, 2013 at 09:43

JT, you know you don’t have to pay your taxes until April 15 regardless of when you file, right? Anyway, you’re right, sounds like you’re doing great for a college kid! I know I did nothing but “break even” through college – it wasn’t until after graduation that I even considered getting serious about saving money and building wealth (and fortunately I didn’t rack up any consumer debt in college, and my student loans were very manageable).

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JT April 17, 2013 at 08:08

Yeah, I’ve always associated the actual filing and paying taxes to be something done at the same time. I ran into some funky software issues this year that double counted revenue. That took a little extra time to sort…paying 2x what I owed didn’t seem like such a great deal.

The student loan statistic hit me like a ton of bricks when I saw it, so I had to include it. As good as the economy may seem, especially for people with financial assets, there are a ton of people just barely getting by. To see 35% of people are delinquent on student loans is unreal. I don’t think delinquencies have ever been so high on any loan in the history of the United States, ever. It’s truly historic.

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Kevin Watts @Graduatingfromdebt April 16, 2013 at 21:29

Man I can’t believe your still in college. You are doing awesome. With tax income fraud becoming more pervasive don’t you run a higher risk by waiting till the last minute? Maybe I’m being paranoid here lol

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JT McGee April 26, 2013 at 16:36

Thanks, Kevin. As for risk…I guess there’s a risk I’d get audited, which would definitely suck insofar as how dreadful the process might be, but I’m not in the tax fraud camp, so they can waste their time on me all day! That said, I wish I were in a tax bracket where such an audit would be worth their time!

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