Money Management

Tax season is starting soon. Read on to learn about some key forms you can expect to receive shortly. 

Like it or not, we’re getting to the point of the year when it’s time to start thinking about taxes. Although the filing deadline is April 15, the IRS will begin accepting tax returns on Jan. 29. And filing your taxes early could mean getting your refund sooner, if you’re entitled to one.

To file your tax return, you’ll need certain forms. Here are five to be on the lookout for early this year.

1. Your W-2

Your W-2 is a form your employer provides you with that summarizes your wages for the year. It also shows the amount of tax you had withheld from your earnings. If you contributed to your employer’s retirement plan, that information will be on your W-2 as well. You can expect to receive this form sometime in January, as employers are required to send them by the end of the month.

2. 1099-MISC forms

There are different types of 1099 forms you might receive early this year. But if you did freelance work for a client that paid you $600 or more, you should receive a 1099-MISC summarizing that income.

However, if you don’t have that form, don’t take it to mean that you don’t have to report your earnings. Similarly, earnings under the $600 threshold should still be reported to the IRS and included on your tax return.

Similar to W-2s, 1099 forms are due at the end of January. If you get to February and find that you’re missing one you expect, contact the issuer to follow up.

3. A 1099-INT

If you had money in a savings account earning interest last year, expect a 1099-INT form to either show up in the mail or your inbox. You may also need to log into your bank account to pull it up. This form will show how much interest you earned last year. You’ll need to pay taxes on that income.

4. A 1099-DIV

If you received dividend payments or distributions from any of your investments in a brokerage account in 2023, expect to receive this form. Again, it may come in the mail or pop up in your inbox, but often, you’ll need to log into your account to download a copy electronically.

Investment income is generally subject to taxes. There can be exceptions, though — sometimes, long-term capital gains don’t create a tax liability for lower earners.

5. Form 1098

If you own a home and paid into a mortgage last year, expect to receive this form from your loan servicer. It should summarize the amount of interest you paid on your mortgage. If you itemize on your tax return, you can deduct mortgage interest.

Depending on your tax situation, there are other forms you may receive early in the year that you’ll need to file your return. A good bet, in fact, is to look at last year’s taxes to get a sense of the various forms you’ll need. If you’re working with an accountant, they can help you put together a checklist so you’ll know which forms to follow up on if they don’t make their way to you early in the year.

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Having multiple CDs makes sense for me, and it may make sense for you, too. Read on to learn more. 

The money I’m saving for emergency expenses like home and car repairs is cash I’m leaving in a regular savings account. I can’t put that money into a certificate of deposit (CD) because I might need it at any time, and CDs force you to keep your money in the bank until they mature.

But thankfully, I have savings outside of my emergency fund. Normally, I’d invest more of my money. But because CDs are paying generously these days, I’ve opted, for the time being, to keep more cash in the bank.

The way I see it, CDs give me a risk-free return on my cash, whereas with stocks, I could lose money. It’s not worth it to me to forgo the higher return I might get in a brokerage account when CDs are paying 2% interest. But right now, I’m earning upward of 5% interest on most of my CDs, which have a one-year term. To me, that’s reason enough to stick to CDs until rates start to fall.

But the money I have in CDs is in, well CDs — as in, plural. I could’ve simply taken all of my money and opened a single CD, but instead, I opted for six. There was a very good reason for that decision, though.

It’s all about having options

I bank at Capital One, and the penalty for cashing out a CD with a term of 12 months or less before it comes due is three months of interest. I’m not very eager to lose interest income because that’s the whole point of opening a CD in the first place.

But I also know that sometimes, things happen. I may end up in a situation where I need more money than what my emergency fund contains. So I want to make sure I’m leaving myself with options as far as my CDs go.

Instead of opening a single 12-month CD, I took the money I wanted to put into a CD and divided it into six pieces. I then opened six different 12-month CDs, with each one set to mature about two months after the next. This way, I gain access to some of my money every couple of months instead of having to wait 12 months.

For example, one of my CDs is coming due very shortly. If my circumstances don’t change in the next couple of weeks, and if I’m still happy with the interest rate my bank is paying, I’ll roll that cash into a new 12-month CD. If I decide I want the money for something else, I’ll close out the CD and get that money transferred into my savings account. It’s that simple.

Laddering CDs is a smart bet

The strategy I’ve described above for my CDs is called CD laddering, and you don’t necessarily need to do it to the extreme that I do. In other words, you may find that having six different CDs is too cumbersome, especially since it’s important to keep track of when your CDs are coming due. So if you’d rather limit yourself to three or four CDs, that works, too.

The key, however, is to set yourself up so you have money coming due at different intervals during the year in case you wind up with a need for cash. It’s a good way to lower your risk of being penalized by cashing out a CD ahead of schedule. And it might also make the idea of tying money up in a CD a lot less scary, especially if that’s something you haven’t done before.

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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.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Owning a home is expensive. One tactic is sometimes successful in helping to lower those costs, but this year, it’s a tricky one to pull off. See why. 

Owning a home is something you really have to prepare for financially. After all, it’s not just your monthly mortgage payment you have to cover once you buy a home. On top of the money you send your mortgage lender, you have to set aside funds for homeowners insurance, homeowners association (HOA) fees in some cases, maintenance, and repairs.

And then there are property taxes to think about. When you own a home, those taxes are a given. If you’re part of an HOA, you might pay monthly dues that include a portion that goes toward your property tax bill. But you’re paying those taxes either way.

Rising property taxes can make owning a home even tougher. But the good news is that as a homeowner, you have the right to appeal your property tax bill if you feel that your home’s assessed value is too high.

Property taxes are calculated based on your home’s assessed value multiplied by your local tax rate. So as a basic example, if you own a home that’s determined to be worth $500,000 and your local tax rate is 2%, you’re looking at a $10,000 annual property tax bill.

In this situation, if you feel that your home is worth less than $500,000, it would make sense to appeal your tax bill. Winning that appeal could leave you paying less.

But appealing property taxes may not be so easy in 2024. So unfortunately, it’s not necessarily a strategy you can bank on.

Why a property tax appeal might be hard to pull off this year

When you appeal your property taxes, what you’re actually doing is trying to argue down the assessed value of your home. But because home values are up across the board right now, you may have a hard time proving that your property is worth less than a local assessor says it is.

The National Association of Realtors says that as of November, U.S. home prices were up 4% on an annual basis. Not only that, but as of the end of November, the market still lacked inventory in a very big way.

Both of these factors are not at all conducive to a successful property tax appeal. Generally higher home values means your home is likely to be assessed at a higher value than usual. And when inventory is low, it means there aren’t a lot of homes being sold. So you may have a hard time finding a home that’s comparable to yours that recently sold at a lower price than your assessed value — something you often need to do to win a property tax appeal.

Other ways to lower your homeownership costs

Winning a property tax appeal may not quite be in the cards in 2024 — not unless home values start to come down in short order and inventory picks up. But that doesn’t mean you’re doomed to struggle with expensive homeownership costs. If you’re having a hard time keeping up, consider the following moves.

Shop around for new homeowners insurance and see if there’s a more affordable option out there.Do more of your home maintenance yourself, instead of outsourcing it.Refinance your mortgage if today’s rates are lower than the rate you locked in (for many current homeowners, this won’t be the case, but if you happen to have a higher rate on your mortgage, this strategy could work).Monetize your home if you’re having difficulty affording it, such as renting out a finished basement or garage.

Appealing property taxes can sometimes be an effective way to make homeownership less expensive. But until housing market conditions change, you may want to focus on other ways to make your home easier to afford.

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Homeowners have a higher net worth than renters, but you may be surprised at just how much higher it really is. Find out more here. 

Your net worth is the value of your assets after subtracting everything that you owe. It’s a really good way to measure your wealth. To calculate it, add up the value of everything you own (your house, cars, personal property, investments, and more) and then subtract all your debts (mortgages, car loans, credit card debt, and all other obligations).

When you look at data on net worth, homeowners have a much higher net worth than renters do. That means that, even after taking their mortgage into account, they have much more wealth than people who rent.

But just how much higher is the net worth of homeowners? Here’s what you need to know.

The net worth of homeowners vs. renters will shock you

According to the Federal Reserve, homeowners had a median net worth of $396,200 in 2022 and a mean net worth of $1,530,900 (which obviously has been driven up by some very wealthy people).

Renters, on the other hand, have a median net worth of just $10,400 and a mean net worth of $154,900. This is a very small fraction of the wealth that homeowners have. But as big as this gap is, it actually represents an improvement. Between 2019 and 2022, the median and mean net worth of renters grew by 43% and 40% respectively, while homeowners only saw their median and mean net worth grow by 34% and 20%.

Renters may have seen their fortunes improve during this time in part because of pandemic-related stimulus funds. These would have had a greater impact on their overall wealth than on those who had more money to start with.

Why do homeowners have such a higher net worth?

Homeowners, as a group, are undoubtedly much wealthier than renters, and to a shocking degree. And there are a few reasons for that.

The most obvious reason has to do with the fact that you need to have pretty stable personal finances in order to be able to buy a house in the first place. In other words, people who are already doing pretty well — and who are on track to building wealth — are more likely to take out a mortgage and buy a home. People who are struggling and who have very few assets are more likely to be renters, since they can’t afford a down payment or qualify for a home loan.

So, it is not necessarily that a home makes people wealthier, but instead that wealthier people are more likely to be in a position to buy a home.

The reality, though, is that owning a home usually does make it a whole lot easier to build wealth. That’s because:

Each housing payment helps the homeowner acquire a valuable asset, which they eventually own free and clear. So each payment grows their net worth a bit, which is not the case when someone is paying rent.Homes often go up in value. A homeowner could add tens of thousands, or even millions of dollars, to their net worth as the home they are living in increases in value.

This does not mean you must buy a home to grow rich — although it can help, especially if you aren’t that disciplined about saving and investing. You will, of course, need to make sure you’re in a good financial position to buy though (with housing costs taking up no more than about 30% of your income) or you could risk foreclosure or being unable to do other things important to getting rich, like investing for your future.

If you decide not to buy a home, though, you’ll need to make sure you are using plenty of your money to purchase other assets (such as stocks) that can help your wealth grow over time. You won’t have the forced saving and property appreciation a homeowner gets, so if you want to be rich, you’ll need to be much more intentional about finding another way to make it happen.

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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.The Motley Fool has a disclosure policy.

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