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Subject:  Re: Distribution of a 401k Date:  8/28/2006  10:59 PM
Author:  RetireAtFifty Number:  53383 of 88033

Hey, are you guys tax auditors?

I paid $84 total federal income taxes. When I first calculated it, I thought I'd be going to jail :-) But it's all legit.

First let me say we live an incredibly frugal lifestyle, one that would make Jeremy Segal, author of "The Millionaire Next Door", jealous. Also, I have almost $1,000,000 in mortgage debt.

We read an interesting article about how to not keep up with the Jones's. We budget $1000 / month for food and $1000 for EVERYTHING else (natural gas, electric, cable, toys, clothes, vacations (camping), gas and oil, etc.). We don't have a lawn service, our cars (which we bought used) are paid off, we pack lunches when we go anywhere - like the zoo, and our non-mortgage debt is mostly at 0% (we get a new 0% card each year). We shop online, expecially Ebay (I'm writing this on a $1400 Dell dual core laptop I got new for $661!) My wife is an AWESOME garage sale shopper, and her and I are on the same page with regard to expenses. We bake our own bread, mend our own clothes (when was the last time you heard someone do that!), grow our own vegetables, and have sex for entertainment! BUT, I am an software engineering manager with a good salary, and throttle my desires for more stuff / junk that we don't need. I like to shop at my neighbors garage sales - they have the best stuff a few years old that is hardly used.

OK, here are the details...In 2004, I refinanced two townhomes that are rental properties with 80% LTV, and bought a $400k home at 80% LTV. I was going to list approximate deduction amounts, but decided that was too personal, so here are the highlights...

Big deductions:
- property taxes (3 properties)
- interest paid (3 properties)
- rental property depreciation on a 27.5 year depreciation schedule (I am deferring taxes on this, and will have to pay tax on this when I sell the properties)

Medium deductions:
- principal paid on rental business (a cost of having the property, does not include primary residence)
- expenses for rental business (advertising, cleaning, maintenance, repairs, association, milage, etc.)
- points paid on 1 primary residence purchase, 1 primary residence refi (hey, interest rates were lower), and 2 rental property refi's)
- 401k contributions

Small deductions:
- cash contributions to church and K-Love ratio station (non-profit)
- non-contributions to amvets, salvation army, church
- $3,000 per year for previous stock losses (max allowed) (from dot-bomb crash) (and why I joined TMF this year - did you know your TMF subscription is tax deductable?)

Add on top of that my wife doesn't work, and we have three kids five and under (who don't care if they have garage sale clothes and toys). We don't have day care expenses, and my wife makes her own games and crafts for our kids - she is AWESOME! and a major part of why we are successful.

Now that I have YOUR attention, can I get feedback on MY question???
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