{ "media_type": "text", "post_content": "Am I going crazy or does it make sense to lower your tax withholdings to have more cash at hand and pay off high interest credit card debt faster - with caveat of paying the extra taxes at tax time?", "post_id": "607a66f62591c9002f19b244", "reply_count": 7, "vote_count": 4, "bowl_id": "552d1d24dc1c586b09d2d051", "bowl_name": "Consulting" }

Am I going crazy or does it make sense to lower your tax withholdings to have more cash at hand and pay off high interest credit card debt faster - with caveat of paying the extra taxes at tax time?

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If you under withhold too much you will owe a penalty (though it has to be pretty egregious). Otherwise, as long as you’re sure you can come up with the cash next year by tax time, sure.

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You’re not crazy. That’s what tax planning is all about. You can lower it but make sure you don’t expect to owe so much that you would incur underpayment penalties (see form 2220 for details). People do say that refunds/overpayments are basically an interest free loan to the government.

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Can you pay off credit card debts by controlling spending and tightening up a bit?

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I don’t escrow any of my houses including rentals for this reason. I keep my taxes until tax man from my Texas county sends me a stupidly high bill that I have to fight each year. I just need multiple tens of thousands avail to pay that.

Wait which part are you fighting? Are they asking for more money because you didn't pay up front?

Unless you own a house or do a Schedule A, then the answer is generally a resounding no.

Yes, I have always elected for no refund/owe more at tax time. For your particular example interest rates on that debt is much higher than just paying the same amount (taxes) later in year so fiscally you would want to attack the expense first.

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