Money Management

Your income tax will go up, but there is more to the story. Read on for a closer look. 

If you earn significantly more in 2023 than you did in 2022, it’s possible that your income could fall into a higher tax bracket than it previously did. While it is common knowledge that moving to a higher tax bracket will usually result in a higher tax bill, many people don’t know how to figure out the impact it will have on their wallets.

With that in mind, here’s a quick overview of the U.S. tax brackets, how they are used to determine your income tax for the year, and how to apply these to your taxable income to figure out how much more you’ll pay if you move into a higher bracket.

The 2023 U.S. tax brackets

Under the current tax law, there are seven individual income tax brackets in the United States. The income ranges that each tax bracket applies to are adjusted for inflation each year, and here’s what they are for the three most common filing statuses for the 2023 tax year (the return you will file in 2024):

Also, keep in mind the tax brackets are only applied to taxable income, meaning after all of the deductions you qualify for are subtracted.

How the marginal tax system works

One common misconception — especially among younger Americans — is that your tax bracket is the percentage that is applied to all of your taxable income. But this isn’t how it works.

The United States uses a marginal tax system, which means the income tax rates are only applied to certain income. For example, if you are single and have $100,000 in taxable income in 2023, you are in the 24% tax bracket. But that percentage is only applied to your taxable income over $95,375.

A real world example

If this sounds confusing, it’s completely understandable. So, let’s use the tax bracket table above to look at how this could work in the real world.

Let’s say you’re a married couple filing a joint tax return, and you have $100,000 in taxable income in 2023. According to the table, this puts you in the 22% tax bracket.

However, you only pay the 22% tax rate on your income that is greater than $89,450. You pay the lower tax rates on the rest of your income. Specifically, here’s how you could calculate your federal income tax for 2023:

10% of the first $22,000 in taxable income = $2,200.12% of the amount greater than $22,000 but less than $89,450. This rate therefore applies to $67,450 of your income, which adds $8,094 to your tax liability for the year.Finally, the 22% rate would apply to taxable income greater than $89,450. Since your taxable income in 2023 is $100,000, this rate would apply to $10,550 of your income, resulting in tax of $2,321.

Adding these three results together shows that your federal income tax for 2023 is $12,615. One important takeaway is that even though you’re in the 22% tax bracket, this tax amount is just 12.6% of your total taxable income.

How much will your income tax go up?

The short answer is that it depends on your situation. Moving from the 24% to the 32% tax bracket is a bigger leap than moving from 22% to 24%. And it depends how much of your income falls into your new, higher tax bracket. So, while moving to a higher tax bracket will almost certainly increase the amount of federal income tax you pay, the exact impact on your wallet will depend on your unique circumstances.

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Want to improve your health? Read on to see how Costco can help make that happen. 

Many people who shop at Costco make a point to stock up on things like chips and baked goods. And while Costco certainly sells its share of products that don’t necessarily lend to great health (especially when consumed in bulk), it also carries its share of items that specifically promote good health.

If you’re looking for a way to improve your health without having to raid your savings account in the process, then it pays to put your Costco membership to good use. Here’s how that membership can help you be healthier.

1. You can load up on veggies in bulk

Costco’s selection of fresh vegetables varies a bit by region. But all told, you can find a host of bulk veggies at Costco, from spinach to broccoli to salad blends that make it easier to throw together a quick lunch.

Often, buying bulk vegetables at Costco will result in a lower credit card tab than buying them at the supermarket. Ultimately, though, you’ll need to compare prices based on where you live, since Costco prices vary by region.

In the New York metro area, for example, a two-pound bag of broccoli florets is $6.77 for same-day delivery (which tends to be higher than the in-store price). You’ll need to see how much each item costs in your neck of the woods to get a sense of your savings.

Also, be careful when buying vegetables in bulk, because if you let half of your haul go bad on you before finishing it, you may not end up saving yourself any money at all. You may want to stick to veggies you already consume or can incorporate into different meals.

2. You can stock up on vitamins

Taking vitamin pills on a regular basis could help ensure that you’re getting the nutrients you need. And you may find that Costco has a better price on vitamins than other retailers.

Right now, for example, Costco has One A Day women’s multivitamins on sale for $18.99 for a 300 count (note that this is a New York metro area price). That’s $0.06 per pill. Amazon has a pretty good deal on this same vitamin with its Subscribe & Save program — a 200-count bottle is just $13.57. But in that case, you’re still paying more like $0.07 per pill.

Also, if you’re willing to buy Kirkland vitamins, you might save even more. A 500-count bottle of Kirkland multivitamins is only $16.99 right now at Costco, which has you paying just $0.03 per pill. (Again, this is a New York metro price.)

3. You can save money on prescriptions

Through Costco’s pharmacy service, members can access savings on prescriptions they pick up or have delivered to their door. And getting access to affordable medications is a key step in staying healthy.

How much will you actually save on medications by purchasing them through Costco? Well, that will depend on different factors, including what type of health insurance you have and the pills you take.

On its website, Costco says that it sells 90 tablets of Atorvastatin Calcium, the generic version of the cholesterol drug Lipitor, for $16.79. At Walgreens pharmacy, the cost is reportedly $35.79 (based on Costco’s comparison tool).

Ultimately, you’ll need to price out your options based on your needs. You may also need to switch over to generics (if your doctor allows for it) to reap the most savings at Costco’s pharmacies.

You may not think of Costco as a store that promotes good health. But it absolutely can — especially if you take advantage of these offerings.

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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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Maurie Backman has positions in Amazon.com. The Motley Fool has positions in and recommends Amazon.com and Costco Wholesale. The Motley Fool has a disclosure policy.

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Paying attention to the dimensions of every room — including the garage — can be very important when you’re building a home. 

If you are building a house instead of buying an existing property, there are a lot of little things you need to focus on. If you’ve never gotten a mortgage and built a home before, it’s easy to miss some things that you end up regretting.

In particular, there’s one thing you may not really think about that you need to pay careful attention to. Here’s what it is.

You can’t afford to miss this during the building process

One of the biggest things you need to pay attention to when building a house are the dimensions of the different rooms on the floor plan — and particularly, rooms like the garage where you absolutely need to have a certain amount of space.

When I was building my house, I made the mistake of not paying enough attention to this issue. I looked at the layout of the rooms and how they fit together and what kinds of rooms would be in the house — but I didn’t really spend a lot of time checking out how big everything was.

For most of the house, this ended up fine. My living room, kitchen, and bedrooms are a good size. But there was one huge problem: My three-car garage ended up being way smaller than it reasonably should have been.

Since I didn’t know a whole lot about garage dimensions, when I saw it was labeled as a three-car unit, I figured that would be plenty of space. The problem is, it is very short and as a result, I cannot fit my full-size SUV into it. There are also a lot of weird little spaces carved out of it for things like a staircase leading from the garage to the basement, so we really end up being able to fit only one car in it instead of three.

This has been a huge hassle since my car has to be parked in the driveway even during snowy weather and we can’t fit multiple cars in even when we really need to, like when we had a hail storm and wanted to move both of our vehicles into the garage to protect them.

Make sure you end up in a home you’re happy with

It’s easy to get overwhelmed with all of the details involved in building a house. And some of them that you assume will matter a lot to you end up not being that important in the end. The room dimensions, though, can’t easily be changed once the home’s construction is underway.

To make sure you end up happy with your house and not wishing you’d made certain rooms bigger, take the time to look carefully at the dimensions and get a feel for how big your space will actually be. Doing this early in the building process when you can change your floor plan could save you a lot of the headaches I’ve had to experience since moving into my custom-built home.

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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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Love Dunkin’? Read on to see how you can enjoy coffee at no cost this month. 

What happened

Dunkin’ is offering members of its rewards program the opportunity to score a free coffee every Monday in May. Through May 31, Dunkin’ Reward members will be eligible for a free medium hot or iced coffee with any purchase.

So what

Last year, Dunkin’ replaced its DD Perks program with its new Dunkin’ Rewards program. That move was met with mixed reviews, as some Dunkin’ fans felt the change made it harder to score fancier drinks for free. But the goal, said Dunkin’, was to make it easier for members to rack up free food and beverages.

Meanwhile, Dunkin’ has, over the past number of months, rolled out numerous promotions for Dunkin’ Rewards members. And May’s free coffee on Mondays offer is pretty enticing.

“Mondays in May promise to be anything but mundane, as Dunkin’ Rewards is ready to perk up your week with a FREE Medium Hot or Iced Coffee with any purchase every Monday in May* – the perfect remedy for the Monday blues,” said Dunkin’ on its website.

Now what

Scoring a free coffee every Monday in May might save you between $10 and $15 this month, depending on the cost of Dunkin’ where you live. In the New York metro area, for example, a large hot Dunkin’ coffee costs $3.08. That may not seem like a ton of money at first, but at a time when everything is so expensive due to inflation, keeping that cash in your bank account is helpful.

Of course, ultimately, the best way to save money on coffee is to brew your own. And if money is tight and you already have credit card debt, then you should probably be skipping your daily Dunkin’ run until your personal financial situation improves.

But if you’re doing fine financially and your morning Dunkin’ coffee is just the thing that gets you through the day, then you deserve to keep treating yourself. If you manage your paychecks wisely and spend more frugally in other expense categories, you can enjoy a daily store-bought coffee and still meet your savings goals.

Incidentally, Dunkin’ is offering Rewards members some additional perks for the month of May, including a free medium iced coffee with any purchase and a $2 medium signature latte with any purchase. These are deals you may want to take advantage of while they last.

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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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Banks can take money from your checking account, savings account, and CDs under one condition. Read on to discover how it’s done and how you can prevent it. 

Yes, contrary to what you might think, a bank can take money out of your checking account, even if you don’t authorize it. It’s called a “right to offset” and it typically happens in one situation: When you owe your bank money on a loan.

When can a bank take money out of your account?

The only time a bank can withdraw money without your permission is if you’ve defaulted on one of its loan products (such as a car loan) and you also have a checking account, savings account, or certificate of deposit (CD) with the same institution.

The technical term for this is the “right to offset.” Basically, this gives financial institutions the right to apply funding from your checking account or CD against outstanding balances. The account and loan must be with the same bank for the right to offset to be legal. A bank cannot seize funding from a checking account that isn’t theirs.

For instance, let’s say someone has $4,500 in a checking account with an institution we’ll refer to as “Bank A.” This person also owes $2,500 on a car loan through Bank A. After failing to pay the minimum balance for 90 days, Bank A sets off the debt by taking $2,500 from the checking account. The checking account balance is reduced to $2,000 and Bank A considers the debt satisfied.

But now let’s say this same person doesn’t have a car loan through Bank A but instead through a different institution, “Bank B.” In this case, Bank B cannot take funding from the Bank A checking account; they would have to go through a debt collector if the person continued to leave the balance unpaid.

What debts fall under the right to offset?

Personal loans, car loans, and mortgages can all fall under a bank’s right to offset. One notable exception is credit cards: the Federal Reserve Board prohibits banks from taking money from your account to satisfy overdue credit card debts.

How much money can banks take?

Each state has different laws that bar banks from dropping the funds in your checking or saving accounts below a certain threshold. For instance, California law prohibits banks from dropping your checking account balance below $1,000. Check your state laws to understand how much banks can legally take.

Can a bank take money from your retirement accounts?

No, banks typically can’t seize money from your 401(k) or IRA account, even if they are the account provider. Often they can only take money from checking accounts, savings accounts, and CDs.

Can you prevent a bank from taking money from your accounts?

If you signed a deposit agreement that included a right to offset clause, then you cannot legally prevent a bank from seizing funds for unpaid balances.

That said, most banks and credit unions are willing to work with you on your debts. Often, banks will only execute their right to offset as a last resort — that is, when you’re unresponsive to and ignoring phone calls. If you need the money in your bank account for some other purpose — to pay rent, for instance — talk to your bank directly and work out a debt repayment plan. Most banks will be willing to work with you — you just have to show that you’re also willing to work with them.

If your bank isn’t cooperative, you could try to reduce how much you owe by transferring your debt to a 0% APR credit card. These cards come with an introductory period of zero interest, which can help you pay down the principal. And if you get the credit card from a financial institution that isn’t your bank, you could avoid the right to offset altogether.

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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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