The Texas Tax Two-Step
I had an engineering professor at A&M who shared this tip, and so I will share it with you.
This professor was a conservative Christian and an elder at a large church in town, and taught me Engineering Economics. It’s the class where I figured out I was a lot better at economics than engineering. Whereas I was an average chemical engineer (i.e. about average among the 14% who start and finish a chemical engineering degree without washing out), in this class I did really well.
I found it amusing that people smarter than me in something like, oh say Mass Transfer Operations (distillation towers made my brain hurt), totally shut down when it came to financial calculations. Garden-variety amortization was too much for some of them.
Anyway, this professor shared a particularly interesting tax strategy I’ve never heard anyone else talk about. The key to his strategy is the fact that the state of Texas allows you to pay your property tax for a certain year in either December of the same year or January of the following year. There’s no penalty, and when you pay is up to you.
He would pay last year’s property tax in January and this year’s property tax in December. In that year, he would also double-tithe (or alternatively, save up last year’s tithe in an interest bearing account and give it in January of the “on” year). Then, in the “off” year, he would take the standard deduction instead of itemizing, which is $10,700 this year. If you’re in the 25% marginal bracket (typical middle class situation), then this is a savings of over $1000 per year in taxes!
One key part is that you might have to own your house to do this, as the mortgage company usually escrows and pays your property taxes on the same date every year. And your charitable giving has to be such that you would exceed the standard deduction, otherwise it’s pointless. So it’s really a strategy tailor-made for financially secure Christians whose incomes are not too high (as the gummint starts taking away deductions and such when you make too much money- if there’s anything that’ll make you want to start the revolution now, it’s when you meet fedgov’s little friend named AMT).
I shared this with a conservative Christian friend (who has since reformed his view to align with mine) after I heard it. He thought it was neat, but was concerned that such maneuvering, while legal, might be sinful.
What’s sinful IMO is sending one more penny to the federal fetus butchers than the minimum absolutely required to keep them from unconstitutionally seizing your person and property.
But that’s just me. I’m a moderate on the issue.