Effective Tax Rate 0.00%

 In past years, I would normally end up with a tax rate of about 12% on my gross income. For 2020 my effective tax rate was zero percent. How did it get to zero? Well, this was the first full year without any taxable employment income. I reported 10 weeks of unemployment income and the rest was investment income. Tax withheld from the unemployment payments came back as a tax refund. I managed to make as much as my girlfriend who worked a few months, collected unemployment, and disability benefits during the year. Her tax rate for 2020 was 3.73%. Our combined incomes allowed us to pay our household bills. Without the last minute tax law change that excluded up to $10,200 of unemployment income, we would have had a much smaller federal tax refund. However, the State we live in did not have this exclusion. So, our State tax refund was much smaller and amounted to about $25 for each of us.

This year, my daily routine consists of monitoring and adjusting my investment portfolio. I spend 2 or 3 hours each morning checking stock prices and watching investment news videos on YouTube. Making money in the stock market is no guarantee, but I have managed to increase the value of my investments by 20% over the past year. Most of the increase was in a tax deferred retirement account. My taxable account is geared toward producing monthly dividend income. This account generates about six hundred dollars every month. $400 is automatically transferred to a checking account each month. From that checking account, I pay about $640 (mortgage and credit card bill). The extra $240 each month comes out of the checking account balance. That will lower the account balance by $2,880 each year. But, I am not worried, as I will be eligible for social security and be able to start taking money out of my retirement account, long before the checking account balance is depleted. 

The mortgage payment will never completely go away. Right now, the majority of the mortgage payment goes to pay property taxes. The one thing that is hard to accounted for is inflation. In the past ten years, the value of our house has increased by $165,000. We purchased the home after the housing bubble back in 2011, when home prices were at their lowest. We selected the home knowing that the condition and prime location would help it increase in value. Property taxes have remained affordable. But, that could change. Now may not be the best time to invest in a new home. Interest rates are still low, demand is up, and material prices have increased, making home prices unusually high.