Talk me into or out of this crazy idea (tax related)

Miscellaneous and Personal Stuff I Must Share
1

So, due to a math error made last January, i find myself owing roughly $1000 in federal tax.
I could pay it, but I also realized this crazy scheme is available -

If I can take $6500 in deductions I can reduce my tax bill to 0.
I have room in my IRA and HSA to accept $6500 in tax year 2016 contributions.
I don’t have $6500 lying around at the moment.

I do have a credit card with a balance transfer offer of 0% until the end of Sept 2018, with a 2% transfer fee. They will “balance transfer” straight to my checking account. I do not carry a balance on this (or any other) card.

I take $6500 (+ $130 in fees) from this card, deposit to checking, then deposit to my tax-advantaged accounts, take the deduction, save for my future, and make relatively modest payments over the next year and a half to pay myself (the 0% card) back.

It seems win-win, as I net something like $770 from the deal, and up saving a few more grand for my old age. There is the issue of making the monthly payment but it would be significantly less than a student loan payment we had been making until recently.

Caveats I should consider?

(the $6500 and $1000 numbers are rounded for convenience)

2

Better to pay yourself than somebody else.

3

What if unexpected expenses prevent you from paying back the $6,500? What if you just forget to make one or more regular payment?

4

The plan is fine. As someone pointed out, you have to make the payments.

Even if you screw up at least you’ve saved $6500 into your IRA.

5

Well, yes that is the risk, as the balance will then shift to usurious credit card rates.

I can mitigate the second risk with automatic payments.
If I find myself in a situation where i can’t cover the payments I have other cheaper financing options available to me. There is always the risk that those options won’t be available if I need them if the unexpected expense is large enough.

6

The “math error”, by the way, was a mistake in filling out my w-4 exemptions after my son was born, probably due to some sleep-deprived fog. " enter “2” for each eligible child; then less “1” if you
have two to four eligible children or less “2” if you have five or more eligible children. " is not exactly a new-parent friendly instruction.

7

No matter how good an idea is, you can always say “What if something goes horribly wrong?” Most of the time, you have a certain optimism that things will not go horribly wrong, and use sound ongoing judgment to reduce the risks, and this is how a fairly well-planned life moves along successrully and fruitfully.