Money Management

Don’t have the cash to pay your tax bill? Read on to see if using a credit card is a smart bet. [[{“value”:”

So you submitted your taxes, only instead of getting a refund this year, you actually owe the IRS a pile of money. If it’s the first time you’ve owed, that may come as a shock. But there could be a number of reasons why you owe money for the first time, such as if you earned side hustle income last year you never paid estimated taxes on or if you earned a lot of interest in your savings account due to higher rates.

If you have a tax bill to tackle, you may be wondering whether it makes sense to pay it using a credit card. And the answer is, it depends on the sum you owe and the benefits your credit card offers.

There can be benefits to paying a tax bill with a credit card

If you have a tax bill you can pay in full — meaning, you have the money in the bank to cover it 100% — then it could pay to put that expense on your credit card. See, the IRS does charge a fee to pay your tax bill by credit card, and that fee ranges from 1.82% to 1.98%. But if your credit card gives you at least 2% cash back, you stand to come out ahead by using it. (Granted, you’re not making much cash back, but it’s something.)

It could also make sense to pay your tax bill using your credit card if you’ve recently gotten a new card and are trying to meet a spending requirement to snag a sign-up bonus. Let’s say you got a new credit card on April 1 that will give you $150 back for spending $3,000 within three months of opening your card. If you normally only charge $800 a month in expenses, you’ll end up a little short of the target. But if you have a $750 tax bill, and your credit card gives you enough cash back to make up for the IRS fee you’ll pay, then it could make sense to use that card and meet your spending requirement.

Don’t use a credit card if you can’t pay in full

When you have the money to pay your tax bill in full, charging it on a credit card could make sense. But if you’ll be carrying that balance, then using a credit card may not pay.

Let’s say you owe $2,500 and your credit card charges 24% interest. If it takes you 18 months to pay off that balance, you’ll be looking at $502 in interest alone. So in that case, it could make more sense to sign up for an IRS payment plan.

Now when you get onto an IRS payment plan, you do incur interest and penalties on your tax bill until it’s paid in full. But you may not pay nearly as much as what your credit card charges.

For example, as of this writing, the interest rate the IRS charges for underpayments is 8%. But if your credit card charges three times as much, you’re apt to fare better with the IRS.

Besides, credit card interest compounds daily, which means your interest can accrue rapidly. The IRS compounds interest quarterly on unpaid tax bills, so aside from the lower rate, you’re not accruing interest at as rapid a pace.

The IRS also charges a 0.5% penalty for late tax payments per month or partial month your payment is late, up to 25%. That penalty isn’t waived when you go onto a payment plan.

However, for a balance of $2,500, it’s $12.50 per month initially. Technically, 18 months of a $12.50 fee is $225. But that assumes you’re paying the full penalty each month, which you won’t be. Instead, you’ll be paying down your balance under a payment plan and therefore whittling down the principal amount the penalty is based on.

All told, using a credit card to pay a tax bill could make sense, but it may not be the best option for you. Run the numbers to see which payment method will cost you the least.

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Buying a starter home? Don’t assume it won’t become your forever home. Read on for a few ways to tell you might end up staying put. [[{“value”:”

In February, the median existing home sold for $384,500, according to the National Association of Realtors. Home prices in your area may be higher or lower. But either way, they’re probably elevated now compared to where they were a few years ago. And since mortgages have gotten expensive to sign, the combination of higher prices and higher borrowing rates may lead you to consider a starter home rather than buying your forever home off the bat.

As the name implies, many people purchase a starter home with the intent to move at some point. But if these signs apply to you, you may end up in your starter home forever.

1. You’re stretching your budget to buy your starter home

Home prices are up these days largely due to a general shortage of inventory. So you may have no choice but to stretch your budget to purchase a home, even if you’d rather not do so.

If you pay too much for a home, though, you may not be able to save money to eventually upsize. So that could lead to a situation where you don’t end up moving — even as your income rises and mortgage rates come down.

2. You’re buying a home that needs a lot of work

Some starter homes are in fine condition but are simply small in size. If you’re buying a home like that, you may eventually be able to upgrade. But if you’re buying a starter home that needs a lot of work, you may end up stuck there for the long haul.

Let’s say you buy a $250,000 starter home, only over the next five years, you wind up spending another $140,000 to get it into decent condition. At that point, you’re in the same boat as above in that you may not have the money to afford a different home.

And from there, you could of course wait a number of years to boost your cash reserves. But once you’ve been in the same home for a decade or longer, it’s easier to resign yourself to staying put.

3. You’re not planning to grow your family

Some people buy starter homes when it’s just them or they’re only part of a couple, and then upsize later on once kids come into the mix. But if you don’t intend to have children, you may find that paying up for a larger home is a waste of money when you can fit into your starter home just fine.

Also, if you’re childfree, you may enjoy certain habits like dining out frequently and traveling. If you upsize to a more expensive home, you may find that you have to give those things up. And that alone might motivate you to stay.

Staying in your starter home isn’t necessarily a bad thing

Any time you purchase a starter home, it’s important to brace for the possibility of never leaving it. But staying in your starter home for the long haul isn’t automatically a bad thing.

If you settle into a routine where you can afford your starter home payments, not upsizing could allow you to save money month to month and meet different financial goals. And also, there’s something to be said for staying in a neighborhood you’re comfortable with.

Plus, if you have kids while living in your starter home, moving could be tough. It could mean having to pull your children out of their school district and effectively forcing them to start over when it comes to making friends.

So all told, there can be benefits to staying a starter home — whether you’re forced to do so or you choose to do so.

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Being late with auto insurance payments may or may not affect your credit. But there can be negative consequences either way. Read on to learn more. [[{“value”:”

Your credit score is an important number. It tells lenders how much risk they’re taking on by loaning you money. As such, it’s wise to do what you can to keep your credit score in good shape.

One move on your part that has the potential to damage your credit score is paying certain bills late. If you fall behind on a credit card or installment loan payment, that will likely get reported to the credit bureaus and result in a hit to your credit score.

But what if you’re late with your auto insurance premiums? Will that damage your credit score?

The answer is, not necessarily. But failing to make your car insurance payments could still have negative consequences.

Your credit score may or may not be impacted

Experian, one of the three credit bureaus, explains that auto insurers typically do not report on-time payments to the credit bureaus. So paying those premiums on time generally won’t help your credit score.

Similarly, car insurance companies typically do not report late premium payments to the credit bureaus. If you’re late by a few weeks or even months, your credit score may not change one bit.

In some cases, though, your auto insurer may decide to send unpaid premiums to a collection agency. At that point, the collection agency may report the debt as delinquent, resulting in credit score damage.

You risk losing your insurance — and your car

If you’re late paying for auto insurance, it may not affect your credit score at all. But you might face dire consequences regardless.

First, you risk losing your coverage. This usually won’t happen when you’re a tiny bit late. And it’s common for auto insurers to offer a grace period before canceling policies. So you may, depending on your insurer, get a late payment notice offering you 30 days to catch up before your policy lapses.

But if you’re really late with your car insurance payment and your policy does lapse, from there, you run into trouble. For one thing, you won’t have protection anymore. If you get into an accident, you won’t have an auto insurance policy to pick up the tab for your vehicle’s damage. And if you cause an accident and aren’t covered, the other driver could potentially sue you personally for damages.

Also, state laws generally require drivers to maintain a minimum amount of auto insurance. Failing to do so could result in fines or the temporary loss of your driver’s license. And if your license is taken away and you can’t get to work, you risk losing your job.

Finally, if you’re in the process of paying off your car, failing to have it insured could result in your vehicle being repossessed. Once your auto insurer cancels your policy due to a lack of payment, it will generally inform your auto lender that this has happened. That could put you in violation of your auto loan agreement and cause you to lose your vehicle.

All told, failing to pay your auto insurance may not hurt your credit, but it could hurt you in other ways. If you’re experiencing a financial hardship that’s making it difficult to pay your premium, contact your insurer and see what you can work out. You may be able to get an extended grace period so your coverage doesn’t lapse and you aren’t left in the lurch.

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Moving day is no one’s idea of a good time. Learn how to cut your costs and make the best of a stressful situation with these tips. [[{“value”:”

Whenever I tell someone how many times I’ve moved house (35 times), I usually get a shocked reaction — and then the correct assumption that I’ve gotten good at this. It’s true — I’m really good at packing, unpacking, making lists, and staying organized while uprooting my life.

I’m hoping my next move (into a house I’ve bought) sometime in 2024 will be my last for a while, but you can bet that I’ll be using the following tips. If you’ve got a move coming up, keep reading — expert moving advice can save you real money.

1. Consider all your moving options

Moving truck, moving trailer, container moving (like PODS), cargo van, and a friend’s station wagon — I have moved with all of these methods, and often using more than one at a time. If you’re hoping not to empty your savings account during a move, price out every option you have.

In my experience, the cheapest options for a move are using your own vehicle (or one you borrowed from a friend), followed by renting a moving trailer that’s connected to your own vehicle. If you don’t already have a trailer hitch, you’ll pay to have one installed on your vehicle.

Forbes reports that the current average cost of trailer hitch installation for a Class 2 trailer (a 12-foot cargo trailer of the type rented by U-Haul is one of these) ranges from $130-$475. I made two moves of over 1,000 miles apiece using a car trailer, and it was more economical than renting a giant truck and paying to gas it up.

I don’t have space here to cover all of your options, but you should know that you have them. Do some research to find out what will work best for your move and your budget — don’t assume the only way to move is via a huge moving truck.

2. Start saving ASAP — and pad your budget

Once you know a move is on the horizon, it pays to start putting money aside for it, if you can. Looking back on all my many (many) moves in adulthood, the ones that went the smoothest were the ones I had some time to plan for, and part of that plan involved working up a realistic budget.

It’s good to know what you’ll pay for needed supplies, a truck or trailer, and potentially help in the form of professional movers. Whatever figure you land on, pad it by an extra $500 — because moving is always more expensive than you think it’ll be.

Pro tip: If you move often, invest in reusable plastic totes — don’t rely on cardboard boxes.

3. Declutter, declutter, declutter

This is a tip I wish I’d been able to implement more often — and it’s one I’m leaning on hard for my next move. Packing everything you own is a great opportunity to throw out, donate, or sell items you don’t need. As you’re digging into closets and drawers, if you find items you haven’t used (or maybe even seen) since you moved into your current place, do you actually need them in the new place? Having less to move equals less hassle — and less time and money spent.

4. Prioritize utility shut-off and change-of-address for mail

There are so many things to do when you move, but you absolutely don’t want to forget to have your utilities shut off and switched to your new place. I caught a surprise bill of $150 after one of my two moves in 2020 — I had remembered to have the electricity/gas service switched to my new rental, but neglected to shut it off at my old one.

And don’t forget to fill out your change-of-address form with the U.S. Postal Service! This is easy to do online these days. Forget this task and you could miss bills, important financial paperwork (like credit card statements), and more.

5. Empty your fridge and pantry

If this is an in-town move, it likely won’t be a big deal to pack up whatever food is left in your fridge, freezer, and pantry and drive it to your new place. But a good way to save some money during your last few weeks in a home is to make as many meals as possible out of food you’ve already paid for. I promise, it’s going to feel so good to go grocery shopping for the first time to stock your new fridge — and it’ll feel even better if your last few weeks at the old place came with smaller grocery bills.

Pro tip: Pack your kitchen near the end of the process.

6. Don’t forget to clean

This is more of a money concern if you’re leaving a rental home behind. But even if you’ve sold your house and are moving out of it, it’s still nice to leave a clean space for the new owners (and you may be required to leave it “broom clean,” per a purchase contract). But if you’re moving out of a rental, getting your security deposit returned is likely at least partially contingent on how clean you leave the space.

So leave a little time after the truck has been loaded to run a broom or vacuum through your former home, give the bathrooms a scrub, and make sure all your garbage and belongings are removed. Getting your security deposit back can help relieve some of the financial pinch of moving.

I sure didn’t ask to become a moving expert, but I gotta play the hand I was dealt! I hope these tips help you save money on your next move, be it just across town or halfway across the country.

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It’s important to try to pay your taxes on time. Read on to see what happens when you don’t. [[{“value”:”

Taxes are due on April 15. And many people who file their taxes wind up with a refund a few weeks later.

But what if you’re in the opposite boat, and you wind up owing money to the IRS? Ideally, you’ll pay that balance in full by April 15, as being late could have consequences. However, the consequences may not be so severe if you file your tax return on time and pay your tax bill a week late.

You’ll be penalized, but the hit may be minimal

There can be steep penalties for being late with a tax return when you owe the IRS money. There are also separate penalties for paying your actual tax bill late.

However, the penalty for failing to file a tax return on time is 5% of your unpaid tax bill per month or partial month you’re late, up to 25%. The penalty for being late with a tax payment is only 0.5% of your unpaid tax bill per month or partial month your return is late, up to 25%.

Ultimately, both penalties max out at the same amount. But initially, the penalty for being late with your tax return is pretty harsh, whereas the penalty for filing late is less harsh.

So let’s say you file your tax return by April 15 and see that you owe $400. But maybe you don’t have $400 sitting in your checking account. Maybe you have to wait another week to get paid, and from there, you can send the IRS its money.

In that case, you’re not going to be hit with a failure-to-file penalty because you got your return in on time. And you’re only going to be penalized 0.5% on your $400 tax debt because you’re paying a week late. In that case, you’re talking about losing $2. That’s probably not a sum you’re going to cry over.

Also, for the record, in addition to the 0.5% penalty, you accrue interest when you’re late paying a tax bill. On a $400 sum you submit a week after the fact, that interest should be negligible, though.

Of course, the financial hit can be much more substantial when you owe thousands of dollars to the IRS. If you owe $40,000 and you’re a week late paying that bill, you’re looking at a penalty of $200. The point, however, is that paying taxes one week late may not be the end of the world as long as you actually file your return on time and your tax bill isn’t so large.

You can get more time to pay if you need it, but you’ll still be penalized

Let’s say that instead of owing the IRS $400 this tax season, you run the numbers through a tax software program and learn you owe $4,000. That’s a sum you may not be able to come up with in a week. It might take you months to pay that bill off.

What you’ll want to do in that case is reach out to the IRS to get on a payment plan. You’ll still incur the aforementioned penalty as well as interest, but you’ll be considered to be in compliance with paying your tax debt.

Now you may be thinking, “Why does that really matter? I’m still getting penalized, so instead of getting onto a payment plan, why don’t I just send the money when I can?”

But the reason for getting onto the payment plan is that you’re showing the IRS you’re not blowing off your tax debt. If you owe money and make no effort to pay, the IRS could eventually seek to garnish your wages to get repaid. If you don’t want that to happen, getting onto and sticking to a payment plan is your best option.

Paying taxes a week late may not be such a huge deal. But if you owe money, the sooner you’re able to pay it, the better.

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You might be spending more on this than you think, and your tax bill might be too high as a result. Keep reading to find out why. [[{“value”:”

The majority of Americans use the standard deduction when they file a tax return, but itemizing can still make sense for many people — especially those who live in areas where state taxes are high or those who pay a relatively high interest rate on their mortgage.

One of the most often overlooked deductions available is for medical expenses. While it might seem like few people would qualify for it, it actually includes significantly more of your expenses than many people would expect.

The medical expense deduction

Here’s the short version. The IRS allows taxpayers who itemize to deduct their qualifying medical expenses that exceed 7.5% of their adjusted gross income (AGI). For example, if your AGI is $100,000, this means that qualifying medical expenses greater than $7,500 can be deducted.

To qualify, medical expenses must be unreimbursed. So you can’t simply claim an expense that your insurance ended up paying 80% of. You also can’t claim any medical expenses paid through a tax-advantaged account like an FSA or HSA. You can, however, count medical expenses that you put on a credit card or borrowed money for. But as we’ll see in the next section, there are more expenses that count than you might expect.

Not as high of a bar as it seems

As mentioned, you might be surprised at how much you’re actually spending on qualified medical expenses every year. The following all count as medical expenses for the purpose of the medical expenses deduction (and this is not an exhaustive list):

Unreimbursed payments for medical care and treatmentCo-pays and out-of-pocket costs for surgeries and other proceduresDental care, including the cost of artificial teethVision care, including the cost of glasses and contactsPayments made to psychiatrists or psychologistsPrescription medicationHearing aidsAny capital expenses to your home if the main purpose is related to a medical condition (such as entrance/exit ramp or adding grab bars in a shower).Chiropractic careFertility treatments and pregnancy testsLong-term care servicesMedical insurance premiums you pay out-of-pocket (this usually excludes employer-sponsored plans)Expenses you pay to travel to receive medical care

The IRS publishes a thorough list of medical expenses that could be deductible, so see if any of yours qualify.

One smart exercise you might want to do is to go through your bank and credit card statements to see how much you’ve spent on medical care in a certain amount of time (ideally a full year). Then compare this figure to 7.5% of your income.

Could the medical expense deduction save you money?

As mentioned, in order to claim the medical expense deduction, you’ll need to itemize deductions on your tax return. This only makes sense if all of your deductions add up to more than your standard deduction. For 2024, the standard deduction is $14,600 for single taxpayers and $29,200 for married couples filing jointly.

There are a few others, but for the most part, there are four major itemizable deductions:

Mortgage interest (on up to $750,000 of qualifying debt)Charitable contributionsState and local taxes (up to $10,000)Medical expenses that exceed 7.5% of AGI

A quick estimate of how much you pay for each of these four categories can help determine if itemizing could be worthwhile to you. If it is, and you have substantial qualifying medical expenses, this deduction could potentially save you hundreds or even thousands of dollars on your taxes.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intuit. The Motley Fool has a disclosure policy.

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