Money Management

Property taxes are usually based on your home’s appraised value and the local millage rate. Find out more about how much these taxes could cost you. 

When you buy a house, you have to look beyond just your monthly mortgage principal and interest payments to understand the total costs of the property.

You will also have to pay property taxes as well. In some cases, you will pay extra on your monthly mortgage loan toward taxes, and the lender puts the money in escrow until it comes time to pay the tax bill. In other situations, you’ll just have to pay the taxes yourself once a year.

Regardless of whether you pay your taxes monthly or in a lump sum out of your bank account, they can add thousands of dollars to your total housing costs. As a result, it’s important to understand how they are calculated so you can get an idea of what you might owe.

Here’s how property taxes are calculated on your house

Property taxes, or real estate taxes, are typically collected by local governments and school districts. You might pay taxes to your town or county, as well as additional school taxes, depending on where you live.

While each location may have slightly different rules and processes, here is how your property tax bill is typically calculated.

The taxing authorities determine the value of your home. To do this, the county or municipality typically orders a periodic appraisal of the home. This means a professional determines its value every year or every few years, depending on your area’s policy.The county takes a percentage of the home’s value to come up with the assessed value. You are usually not taxed on the full market or appraised value of your home, but are instead taxed on a percentage of it. Local areas use a specific assessment ratio, such as taxing 40% of what your home is worth. So if your house appraised for $400,000 and your county taxes 40% of your home’s value, your assessed value that you are taxed on would be $160,000 (40% of $400,000).The county determines the millage rate. Counties determine a mill levy by figuring out the total amount of revenue they need and the assessed value of all of the properties that will be taxed. So, for example, if your local area needs to collect $2 million and all of the property in your area has a collective value of $100,000,000, then your county would divide $100,000,000 by $2 million to determine that a mill levy of 2.00% is necessary.You pay taxes based on the mill levy and your assessed value. So, for example, if you had to pay 2% on your home’s assessed value of $160,000, you would pay $3,200 (2% of $160,000) per year in property tax.

On your property tax bill, you will see your millage rate, which is the tax that you must pay per $1,000 in assessed value.

Why are property taxes important to understand?

It’s important you understand how this calculation works so you can prepare for taxes when buying a home. Property taxes are one of the ongoing costs of homeownership, and you’ll owe them for as long as you own the house. You can see the tax history of any property you are considering purchasing by checking your county’s website. However, since your home may be reassessed when it changes hands, your taxes could change after you buy. You don’t want to be taken by surprise if this happens to you.

Once you know how much taxes are likely to be, you can make sure your home is affordable. Ideally, total housing costs including principal, interest, taxes, and insurance will be below 25% of your income. If that’s not the case, take a close look at what the housing payments will do to your budget and disposable income so you can make an informed choice about whether the home is really affordable for you.

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The government is offering free at-home COVID-19 tests again, which could save your household $50. Find out how to apply for four free rapid tests. 

What happened

The government is reopening its free at-home COVID-19 test scheme. From Sept. 25, every household will be able to apply for four rapid tests online. “These critical investments will strengthen our nation’s production levels of domestic at-home COVID-19 rapid tests and help mitigate the spread of the virus,” said Xavier Becerra, Secretary of the Department of Health and Human Services.

So what

Given that at-home tests can cost around $12 each, getting four free tests for your household could mean almost $50 extra in your bank account. So much has changed since the height of the pandemic and our approach to the virus is very different. But that doesn’t mean we can forget about it entirely.

While scientists hope vaccinations and immunity from previous infections will minimize the impact of further waves, there is an uptick in the number of COVID-19 hospitalizations and cases. With the holiday season approaching, at-home testing is one way to differentiate between a case of COVID-19 and a flu or cold. That can help you make informed decisions about socializing or seeing family.

Now what

To apply for your free at-home tests, go to covid.gov/tests, starting next week. The tests are intended for use before the end of the year. The Department of Health says the free kits — of which there will be 200 million up for grabs — will detect the current variants. The news comes alongside a government announcement that it will invest $600 million into 12 domestic test manufacturers.

Another way to save money on COVID-19 tests? If you have existing tests that are past their expiration date, don’t throw them out just yet. Some will still be effective. The FDA has updated its guidelines and extended the dates on a number of self-testing kits. Check the FDA website for information on the shelf life of each brand.

At the height of the pandemic, there were various ways to get COVID-19 tests for free. For starters, the government required many health insurers to pay for up to eight at-home tests. The same went for people on Medicare. That stopped in May, when the health emergency reached its end. Some insurers have continued to provide free testing. It is worth contacting your insurer to find out what testing and vaccination provisions are covered.

If you are enrolled in Medicaid, you can continue to get over-the-counter and laboratory COVID tests until Sept. 30, 2024. If you don’t have health insurance, there are some free or low-cost testing options. Look for your nearest HRSA health center, Test to Treat site, or an ICATT location to find out more.

In addition to the latest round of free COVID-19 tests, the CDC says most Americans can get vaccinated for free. The FDA has just approved a number of new vaccines, which it says provide better protection against some of the current COVID-19 variants. If you want to get vaccinated, contact your insurance provider or local health center to find out how.

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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.
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Once you have maxed out your 401(k), you may want to put money into other retirement savings accounts or a taxable brokerage account. Find out why. 

Maxing out a 401(k) is an amazing accomplishment. In 2023, you can contribute as much as $22,500 to a 401(k), plus an additional $7,500 if you are age 50 or over and eligible for catch-up contributions. So if you’ve maxed out this account, you are well on your way to a secure future. The big question, though, is what should you do after you’ve contributed all you can to your 401(k).

If you still have more money to invest, here are your other options. It’s also important to know that you can consider these accounts even if you haven’t completely maxed out your 401(k) but have contributed enough to it to earn your full employer match.

You could contribute to another tax-advantaged retirement account

Putting more money away for retirement is a possible option if you’ve maxed out your 401(k). You could use either a traditional IRA or a Roth IRA at a brokerage firm of your choosing.

Traditional IRAs allow you to make contributions with pre-tax dollars just like in a traditional 401(k). You’ll save on your taxes in the year you contribute. Roth IRAs, on the other hand, provide no upfront tax savings when you make your contribution but they allow you to take tax-free withdrawals as a senior.

Be aware of the income limits for taking advantage of these accounts, though. Since you obviously have a workplace retirement plan if you’ve maxed out your 401(k):

Your ability to deduct IRA contributions begins to phase out once you have a modified adjusted gross income (MAGI) of $73,000 as a single tax filer or $116,000 as a married joint filer.Once your MAGI exceeds $83,000 as a single filer or $136,000 as a married joint filer, you can’t make any deductible contributions to a traditional IRA at all.

These are the 2023 limits.

Likewise, eligibility for Roth contributions begins to phase out with a MAGI of $204,000 for married joint filers or $129,000 for single filers, and you cannot contribute at all to a Roth IRA if your income exceeds $214,000 or $144,000, depending whether you’re a married or single filer.

If you are below these income thresholds and you think you may want to save even more for retirement beyond what you put into your 401(k), you can open your traditional or Roth IRA just by completing a simple online application with the broker of your choosing. Be sure to pick a brokerage firm that offers low or no fees and provides access to a wide variety of investments.

You could put money into a taxable brokerage account

Retirement accounts, including 401(k)s traditional and Roth IRAs, come with a lot of restrictions. You cannot contribute more than the allowable amount each year, and if you take money out before age 59½, you get hit with a 10% tax penalty.

If you’ve already maxed out a 401(k), you may not want to lock up more money until your retirement years — even if you do get that tax break for doing so. Instead, you may want to put some of your funds into a taxable brokerage account.

These accounts work differently because not only do you not get to make tax-free contributions or take tax-free withdrawals, but you also can’t always grow your account balance tax-free. If you sell an asset and make a profit in a taxable brokerage account, you’ll pay either short-term or long-term capital gains taxes, depending on whether you owned the investment for at least a year.

While the tax rules make these accounts less favorable and more complicated, a taxable brokerage account could be the right place for extra money after maxing out a 401(k) if you feel you’ve already saved enough for retirement and want to grow wealth that you can access whenever you need it.

You could look into other investments

Finally, you could consider doing something else entirely different with your money after you’ve maxed out your 401(k) besides putting it into another brokerage account that gives you exposure to the stock market.

You could, for example, opt to put more into a high-yield savings account if you want more liquid (easily accessible) cash. Or you could buy certificates of deposit (CDs), which are safe investments that require you to leave your money invested for a period of time (usually several months to several years) in exchange for a guaranteed rate of return that’s usually higher than what a savings account offers.

You could even invest in a business, buy investment properties, or buy alternative assets such as cryptocurrency if you feel like you’re on track for retirement and want to branch out and diversify a little more.

The important thing is, no matter what you do, you’ll want to carefully research the tax rules as well as the risks and benefits of your choice. Since you’ve already made a really smart financial move by contributing so much to your retirement security, there’s no doubt this research will lead you to the choice that’s right for you.

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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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Although inflation has been cooling, it’s still expensive to buy food. Read on for tips to lower your costs. 

As a mom of three kids, one of the biggest expenses in my household is, not surprisingly, food. And even though I make a point to go grocery shopping every week (usually, multiple times a week, in fact), it seems like every time I open the fridge, there’s nothing to eat.

As such, I’m constantly charging food on my credit card. And while I have been seeing some lower prices at the supermarket than earlier in the year, groceries are still pretty darn expensive.

And that’s not just in my neck of the woods. In August, grocery prices were up 3% on an annual basis, as per that month’s Consumer Price Index (an index that measures changes in the cost of consumer goods and services). So even though inflation has been cooling on a whole, it happens to be that one of my largest household expenses is still notably elevated.

That’s why I’ve been trying to take steps to save money on food whenever possible. Here are some tactics you may want to try.

1. Take advantage of your Costco membership

Some people are afraid to do a lot of bulk buying at Costco because they’re worried about wasting food — and money. But the reality is that if you buy the right items in bulk, you can lower your costs without having to stress about food waste.

Let’s say your kids need a daily snack to take to school. Packaged snacks like pretzels, popcorn, and chips tend to have a pretty long shelf life. Even if you buy a few bulk packages for variety, you’re likely to land in a situation where you can use up your haul before anything expires.

Perishables are a different story, though. You might think it’s a good idea to buy bulk meats and vegetables from Costco. But if that’s new to your routine, ease in slowly. Buy one perishable item in bulk to start with and see if you’re able to use it up before going all-in on bulk buying.

2. Buy non-perishables at your local dollar store

There may be certain household staples you really don’t need in bulk. You could buy those at your local grocery store, but they might be cheaper at your local dollar store. It pays to scope out the inventory there and see if you find items you use regularly.

That said, sometimes the prices you’ll see at the dollar store can be comparable to those at the supermarket. Only your local grocery store might have a better range of expiration dates, so be mindful of that detail.

3. Become a couponer

Some people take the concept of collecting coupons to an extreme, spending hours upon hours each week seeking out deals. But if you work or have responsibilities like running a household, you probably don’t have time for that. And that’s okay.

What I tend to do is spend two minutes each week reading the physical circular from my go-to supermarket and clipping any coupons it contains that are useful to me. I’ll then spend another three to five minutes looking for digital coupons online to load to my store card.

It’s not a huge time investment, but it has, in recent weeks, saved me $3 here or $5 there on my groceries. And over time, small savings like that add up nicely.

Although it’s good to see that inflation levels aren’t as high as they were a year ago, it’s still expensive to put food on the table. But these tips have helped me lower my grocery bills, so hopefully they’ll do the same for you.

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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 positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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