Money Management

Don’t subject yourself to hefty penalties by forgetting to pay taxes on your winnings. 

Hit a lucky streak in Vegas? Hit it big in PowerBall? Made some money in your fantasy football league? If so, you may be subject to taxes on your winnings. Many people don’t think about paying taxes on their gambling winnings. In most cases, any money won from gambling activities is considered taxable income and must be reported on your tax return. But how does the IRS determine how much in taxes you owe on your winnings? Let’s take a look.

What is considered gambling income?

Gambling income refers to any money or the fair market value of prizes you have earned through activities involving chance or skills. These activities can include slot machine gaming, betting on sports, horse racing, lottery tickets, and more. The Internal Revenue Service (IRS) requires taxpayers to declare their gambling income when filing taxes. This means that all winnings must be reported, regardless of the amount. It is important to keep accurate records of gambling income, because failure to do so can result in income tax penalties from the IRS.

How much do you owe?

The amount of tax you owe depends largely on the amount of money that you win, the type of gambling, and the ratio of the winnings to the wager. Generally speaking, if your winnings are more than $600 (and at least 300 times the cost of the wager) then it will be reported to the IRS by the entity that paid you. This means that if you win more than $600 playing blackjack, for example, then the casino may have to report this information directly to the IRS. The number increases to $1,200 in gambling winnings from bingo or slot machines, $1,500 or more from Keno, and $5,000 from a poker tournament.

For gambling winnings over $5,000, taxes are generally withheld at a flat rate of 24%. If you did not provide your Social Security number, they may withhold 31%. The full amount of your gambling winnings for the year must be reported on Line 21 of Form 1040. However, if you itemize deductions on your tax return and claim losses (up to the amount of your winnings), then you may be able to deduct your losses on Line 27, Schedule A (Form 1040). Your gambling loss deduction cannot be more than your gambling winnings.

It is important to keep an accurate account of your gambling winnings and losses. To deduct your losses, you must be able to provide proof. These can include receipts, tickets, bank statements, or other records. By taking some time now to familiarize yourself with these rules and regulations regarding taxation of gambling winnings, it could help you save money and time down the road when it’s time to file your tax return.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.

 Read More 

It’s a move that could backfire on you. 

Many people approach the process of buying a home by first narrowing down their neighborhood of choice. If that’s the route you’re going, it’s a smart one. That could help ensure that you end up with access to the amenities you want, whether it’s a great school system or being close to stores or the beach.

Now ideally, you’ll set a budget for your home purchase so you know you’re able to afford the mortgage loan you end up signing. But what if your budget allows you to purchase the most expensive home in the neighborhood you’ve landed on? Doing so might be tempting. But here’s why you may not want to buy the priciest home in the ‘hood.

You might spend more than expected

You might crunch the numbers and find that you can afford to buy the most expensive home in your neighborhood, even based on today’s mortgage rates. But remember, there are costs of owning a home you’ll face outside of a mortgage.

Your property tax bill, for example, might be higher if your home is valued higher. And that expense, coupled with a higher mortgage payment, might cause you to run into issues.

Also, a more expensive home might be costlier to insure. And if it’s larger, you might end up spending a lot more than anticipated on things like maintenance and repairs.

You might struggle to sell your home down the line

When you buy a home that’s already worth more than others in the neighborhood, you risk running into a situation where the value of your home increases at a slower pace than others. And that could be problematic if you decide to sell your home. Plus, there might be a maximum that buyers are willing to spend in that neighborhood.

In January, the median home sale price on a national level was $359,000, according to the National Association of Realtors. Let’s say the typical home in your neighborhood sells for about that much. Even if yours is nicer, and you can justify a $500,000 sale price, buyers may not be willing to pay that much to live in your neck of the woods.

Also, when you buy the most expensive home in the area, you risk having to sell at a loss if property values on a whole don’t improve. Let’s say your neighborhood becomes less desirable so that in 10 years from now, instead of the typical home selling for $359,000, it sells for more like $300,000. In that scenario, the value of your home won’t necessarily fall from $500,000 to $440,000 — it might fall to more like $380,000 or less.

Make your decision carefully

There’s nothing wrong with buying a more expensive home if you can afford one. But if that’s the case, you may want to consider moving to a neighborhood where the amount you’re looking to spend is more like the average. That could really make a big difference if you decide to sell your home down the line.

Our picks for the best credit cards

Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

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.

 Read More 

Her advice is really worth listening to. 

Inflation battered U.S. consumers in 2022. That’s the bad news. The good news, though, is that employers have taken to offering up more generous raises to help compensate for higher living costs.

Late last year, consulting firm Willis Towers Watson predicted that the average U.S. raise would amount to 4.6% in 2023. That could, depending on your salary, result in quite a nice bump.

If you don’t have much or any money in your savings account to cover emergencies, then it’s a good idea to use your raise to beef up your near-term cash reserves. And if you’re still paying off a credit card balance from the holidays (or a credit card balance in general), you should use the extra money in your paychecks to knock that debt out.

But if you’re in decent shape with regard to emergency savings and you aren’t sitting on high-interest debt, then it pays to use your raise to boost your retirement savings. In fact, financial guru Suze Orman has some specific advice in this regard.

Put your raise to good use

It’s not always easy to contribute steadily to a 401(k) or IRA account. You might have more pressing needs for your money, like putting food on the table or gas in your car.

But if you’ve gotten a raise this year, Orman says you should use at least half of it to boost your retirement savings. For example, she says, if you got a 4% raise, raise your IRA or 401(k) contribution rate by 2% and keep the other 2% for bills or other expenses.

The logic here is simple. If you were managing your bills reasonably well as of late last year, and they haven’t risen in the past couple of months, then you should, in theory, be sitting on extra money by virtue of having gotten a raise. Rather than spend that entire raise on living costs, use half of it to boost your retirement savings, and then take the other half to buy yourself more financial wiggle room with day-to-day expenses.

Automate the process so you don’t miss the money

Not only is it a good idea to save at least half of your raise this year for retirement purposes, but you should also make the process easier on yourself by automating it. If you have a 401(k) plan at work, simply ask your employer to deduct more money from your paychecks to increase your savings rate. Then, when you get your paychecks, they’ll be a bit lower, but you’ll know that your 401(k) has already been funded.

If you don’t have access to a 401(k), find an IRA with an automatic transfer option, and arrange for a portion of each paycheck that comes in to land in your IRA off the bat. That way, you won’t have to think about making your monthly contributions. And when you get your remaining funds from your paycheck, you’ll know that they’re yours to spend in full.

Our best stock brokers

We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.

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.

 Read More 

Finding a romantic partner is by no means an inexpensive prospect these days. 

Being single has its pros and cons. The upside is that you can live life the way you want to without having to cater to someone else’s needs. The downside is that being single can be challenging financially. If you’re not coupled up, there’s no one to split the rent or mortgage payment with, and no one to potentially bail you out if you were to lose your job.

Then there’s the logistical and emotional downside of being single. Even if you’re financially stable with a great job and lots of money in your savings account, you might simply want the company of someone to spend your days with.

It’s no wonder, then, that single folks today are willing to shell out quite a bit of money in the hopes of finding a mate. Match’s 2022 Singles in America study found that singles are collectively spending over $117 billion a year on their dating lives. That breaks down to an average of $1,560 per year, or $130 per month.

Now, that’s a lot of money to be spending even in the best of times. But these days, because everything costs more due to inflation, $130 a month might be a stretch for you.

Of course, a big reason it’s gotten so expensive to date is none other than inflation. In fact, the cost of dating has increased 40% over the last 10 years alone. But there are steps you can take to keep your dating costs to a minimum, all while putting yourself out there.

1. Keep things casual

In the aforementioned study, 84% of singles say they prefer a casual first date to one that might involve a high-end restaurant and a large credit card tab. Rather than attempt to wow someone on the first date, find a casual spot and get to know one another over a quick meal or snack.

2. Look at free activities

A good 30% of singles are now more open to doing free activities on a date. Take advantage of that by finding no-cost ways to get to know potential romantic partners, whether it’s walking through a local park or checking out free museum exhibits.

3. Stick to coffee or drinks

You don’t necessarily have to commit to a full meal for a first date, or even a subsequent one. These days, 25% of singles are more open to meeting a date for coffee or drinks, as opposed to a meal. And that way, if you find that the conversation is strained, you can end the date sooner and avoid the awkwardness of having to wait for your entrees to arrive.

4. Wow your dates with your cooking skills

The cost of preparing a meal at home can be far less substantial than the cost of dining out. If you know your way around the kitchen, offer to cook a meal for a date instead. A good 26% of singles are more open to eating a home-cooked meal versus dining at a restaurant.

That said, you may want to reserve this option for a second or third date. That way, there’s some reassurance that you have a connection with the person in question. And also, from a safety standpoint, waiting might be a better bet.

The cost of dating is likely to remain high as inflation rears its ugly head. But you don’t have to go broke in the course of finding your perfect someone. If you’re willing to put in the effort and get creative, you can maintain an active dating life without breaking the bank.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.

 Read More 

The quick answer? It depends on how much savings you have. 

On March 10, Silicon Valley Bank (SVB) collapsed on the heels of a bank run by its customers and a major investment loss. Once that happened, it immediately sent shock waves across the banking sector. And it left millions of Americans wondering whether their money was safe.

In light of what happened at SVB, you may be wondering if you’re okay to keep your money at a single bank, or whether you should spread your cash out across different banks. And the answer depends on how much money you have.

You want full FDIC protection

While SVB’s collapse was no doubt a major blow to its customers, the good news is that the bank itself was FDIC-insured. This means depositors were protected from losses on up to $250,000 in cash. In fact, you get that protection at any FDIC-insured institution. So if you’re worried about keeping all of your money at the same bank, you should know that as long as your total cash deposits don’t exceed $250,000, you’re fully protected from losses.

To be clear, that $250,000 limit is per depositor. Let’s say you have a savings account and a certificate of deposit (CD) at the same bank. If you have $200,000 in a savings account and $100,000 in a CD, it means you’re technically at risk of losing $50,000 if your bank goes under. So in that case, you’d potentially want to move $50,000 (or a little more, to give yourself a cushion as interest accrues) to another bank.

Another thing you should know is that if you have a joint bank account with someone else, that $250,000 FDIC insurance limit applies to each of you. So in the scenario above, let’s say it’s you as well as a spouse who are the account holders for the savings account and CD in question. In that case, your $300,000 in cash is fully protected because your total FDIC insurance limit increases to $500,000.

What about access to funds?

Many people don’t have anywhere close to $250,000 in the bank. So if you have less than that, there’s really no need to bank at multiple institutions if you’d rather keep all of your cash in the same place.

One thing you may be wondering is what happens if your bank fails, and you lose access to your money for a period of time while the FDIC takes over? It’s a valid concern.

Let’s say you have $50,000 in savings, so you’re fully protected from losses by the FDIC. If your bank goes under, will your money be accessible to you in three days? Five days? A week or longer?

The good news is that federal law requires the FDIC to make funds available to banking customers “as soon as possible” once a bank fails. Clearly, that’s a bit of a gray area, though.

But know this: Once SVB failed, customers were already able to access their funds the next business day following its collapse. Specifically, the FDIC took over SVB on a Friday, and by Monday, funds were available to customers.

Now, if you really want the maximum amount of protection, you may want to keep the bulk of your cash in one bank (provided it’s less than $250,000) but also keep a separate checking account or savings account with a small cushion at another bank. But for the most part, this isn’t a step you have to take if your total deposits are totally covered by FDIC insurance.

These savings accounts are FDIC insured and could earn you 14x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 13x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.

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.

 Read More