Money Management

All of these could lower your tax bill. 

No matter how much you earn, your goal is to no doubt pay the IRS as little money as possible. And claiming the right tax deductions is a great way to do that.

A tax deduction exempts a portion of your income from taxes. So your associated savings is based on the tax bracket you fall into.

Let’s say you’re single and earn an income of $50,000. That puts you in the 22% tax bracket. If you claim a $1,000 deduction, that will result in $220 of savings. But if you’re in the 24% bracket, you’re looking at $240 of savings. With that in mind, here are three potentially lucrative tax deductions you may be eligible to claim this year.

1. IRA contributions

The money you put into a traditional IRA account is tax-free. So the more you contribute, up to the maximum allowed by the IRS, the more savings you can reap.

This year, the maximum IRA contribution is $6,500 for savers under the age of 50, and $7,500 for those 50 and over. You can claim an IRA contribution as a tax deduction even if you don’t file an itemized tax return.

Keep in mind that if you put money into a Roth IRA this year, your contributions won’t be tax-deductible for 2023. You will, however, get to enjoy other tax benefits, like tax-free growth and withdrawals.

2. A home office

If you’re self-employed or run a business, you can claim a home office deduction as long as you meet these requirements:

You have a space in your home that’s used solely for work purposesYour home office is your primary office (not one you only use a handful of hours a week)

Now, there’s been a lot of confusion surrounding the home office deduction in recent years since the number of people working from home has increased. But know that if you’re a salaried employee, you cannot take a deduction for your home office — even if it’s your main office and there’s dedicated space in your home for work purposes.

Rather, this deduction is only available to people who work for themselves or run their own business. And you need to itemize on your taxes to claim it.

3. Mortgage interest

If you’re paying off a mortgage loan, you’re allowed to deduct the interest portion of those payments. But don’t get confused and think you can deduct all of the money you pay every month. Rather, your loan servicer will give you an interest statement so you know how much to claim. This deduction, however, is only available to people who file an itemized tax return.

These three are only a few of the tax deductions you might be eligible for in 2023. If you want to eke out the most tax savings, sit down with an accountant and let them walk you through the deductions you’re eligible to claim. There may be tax deductions you’re eligible for that you never even heard of.

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You can enjoy a world of upside without hefty fees. 

When it comes to investing your money, you have choices. You could buy individual stocks in your brokerage account and hope they do well. Or, you could take a more hands-off approach and invest in index or mutual funds instead.

When you buy shares of a mutual fund, you’re paying a team of experts to select your investments for you. In turn, you pay a fee for that service. If you’re not comfortable choosing your own stocks for your portfolio, or you don’t want the pressure, then outsourcing that task, so to speak, may be worthwhile — even if it means having to pay a substantial fee.

But in a recent tweet, investing guru Graham Stephan outlined some of the fees you might get stuck paying when you rely on fund managers to choose your investments for you. And if you don’t like the idea of losing a lot of money to fees, then you may want to focus your investing strategy on index funds instead.

How index funds work

Index funds are passively managed funds whose goal is to simply track and match the performance of different market indexes. Take the S&P 500 index, which consists of the 500 largest publicly traded stocks today. If you buy shares of an S&P 500 index fund, you’re effectively investing in those 500 stocks — only without having to buy them individually.

Since index funds don’t use actual fund managers, the fees associated with investing in them are very low. Mutual funds, on the other hand, have different expenses to cover, and that cost is passed along to investors.

But hefty investment fees could eat away at your returns over time. So if you want to avoid expensive fees, index funds are the way to go.

Now, you may be thinking, “But won’t I do better with mutual funds than with index funds?” The answer? Not necessarily.

In fact, a recent Morningstar report confirms that passive index funds commonly outperform actively managed mutual funds. So don’t assume you’re going to lose out on higher returns by opting for index funds. (To be clear, actively managed mutual funds sometimes do better than index funds. The point, however, is that they don’t have a solid history of outperforming their passively managed counterparts.)

Is there a drawback to sticking with index funds?

The primary downside to limiting yourself to index funds is that your portfolio won’t outperform the broad market. Remember, index funds simply aim to do as well as market indexes — not beat them. If you want the opportunity to generate a higher return than what the broad market is delivering, then you’ll need to hand-pick other investments, such as individual stocks or choose a mutual fund with a strong performance history and hope it keeps doing well.

But if you’re happy with matching the broad market’s performance, then index funds are a good choice. And for context, the average annual return for the S&P 500 index since its inception in 1928 through Dec. 31, 2021 is 11.82%, according to Investopedia. Invest $10,000 at that return for 30 years, and you’ll be sitting on over $285,000. That’s really not such a bad deal.

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Sometimes, you have to weigh the good against the not so good. 

Listening to partisan bickering over whether stimulus funds led to inflation is like hearing two cousins at a funeral, arguing over which one Grandpa Jack wanted to leave his fishing boat to. After a funeral, arguments can be settled when the will is read. And after a global pandemic, it evidently takes an unemotional report from the Federal Reserve to straighten things out.

After conducting a stimulus autopsy of its own, here’s what the Federal Reserve found,

The connection between stimulus checks and inflation

A new study by the St. Louis Federal Reserve found that government stimulus payments were at fault for some U.S. inflation. To be precise, the Fed can trace 2.6% of the 7.9% 12-month inflation rate in February 2022 to stimulus payments.

Here’s what happened

More than half of Americans who received stimulus checks during the pandemic reported using theirs to pay for basic necessities, including rent and food. Those with higher incomes tended to stash their funds away in a savings account. Suddenly, people had access to more disposable income.

However, those folks were still worried about COVID-19 transmission and were under travel restrictions. That meant that instead of paying for services like eating in a restaurant or having a manicure, they spent their money buying goods.

Now, here’s where things got tricky. All that spending was good for the economy. After all, there were legitimate concerns that the economy would fall into a black hole it couldn’t climb out of. However, manufacturing could not keep pace with the demands of the buying public.

The value of any product comes down to demand and supply. The demand was high, and the supply was woefully low. And so, prices crept up and up.

Were stimulus checks worth it?

In the long run? Probably. Here’s why

U.S. economy

As mentioned, there were grave concerns about the havoc COVID-19 could wreak on both the U.S. and the global economy. In order to get the economy back on track, people were going to need to crack their checking accounts open and do some serious spending.

The St. Louis Federal Reserve authors wrote that we must recognize the positive role government support played during this unprecedented crisis. Stimulus spending supported a strong economic rebound, with both GDP and employment recovering at a remarkable pace. While stimulus also added to inflationary concerns, it likely prevented a worse economic outcome for the U.S.

American citizens

The early days of the pandemic were dismal. Low-income Americans, who had already been struggling financially, now had bigger problems to deal with. Many white-collar Americans were able to pull out their laptops and work from home in 2020 as the death toll ticked upward, but others were not that fortunate. Businesses closed, and unemployment surged. The number of people living below the poverty line climbed.

The series of three stimulus checks made the difference. The Fed refers to those payments as “an essential lifeline for low- and moderate-income Americans.” According to the U.S. Census Bureau, stimulus checks may have helped lift nearly 12 million people out of poverty in 2020 alone.

As various factions argued over the necessity of aid to the American people, the Census Bureau also found that problems like malnutrition, mental health issues, and financial instability improved, thanks to stimulus payments.

Studies from both the St. Louis and San Francisco Federal Reserve offices concluded that the social benefits of stimulus payments may outweigh the negatives of inflation.

Of course, like cousins at a funeral, arguing over Grandpa’s fishing boat, we probably haven’t heard the end of this debate.

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You might have difficulty this year if you decide to file an appeal — but that doesn’t mean it’s not worth trying. 

In some parts of the country, property taxes are higher than others. Recent Motley Fool research, for example, found that New Jersey has the highest property taxes in the nation, with the median tax bill coming in at over $7,400.

But property taxes can still be a major burden even in states where the median or average bill is considerably lower. And if your property taxes have gone up a lot this year, you may be considering filing an appeal.

But is that worth doing in 2023? It may be, if you have a strong argument. This year, however, it may be harder to fight a property tax bill for one big reason.

How property tax appeals work

When you appeal your property taxes, what you’re really doing is arguing against your property assessment. See, your tax bill is calculated by taking the effective tax rate where you live and multiplying that by your home’s assessed value. So let’s say that rate is 2%, and your home is assessed at $500,000. That would leave you with a property tax bill of $10,000.

In this situation, you can’t appeal that 2% local tax rate. But you can argue that your home is worth less than $500,000. And if you’re able to prove that your home’s value should only be assessed at $450,000, that should knock your tax bill down to $9,000. The result? A cool $1,000 in savings that you can use for other things — like maintaining your home or paying your mortgage.

Why it’s a tough year to appeal your property tax bill

To win a property tax appeal, you need to prove your home has been assigned too high an assessed value. That may be easy to do if you can pull up data from recent sales in your neighborhood of homes that are comparable to yours and show that those sold for less than the amount of your assessment. Going back to our example, if your home is assessed for $500,000, but there are five similar homes within a half-mile radius that sold within the past few months for just $450,000, you can make the case that your home, too, is only worth $450,000.

But right now, property values are still up on a national level. And also, over the past year, housing inventory has been low, which means a lot of buyers were forced to duke it out in bidding wars, thereby leading to higher prices. So you might struggle this year to find comparable homes that recently sold for a lower price than your assessment. And if you can’t prove that your home has been overassessed, you’re not going to win your appeal.

Plus, while the process of appealing property taxes varies depending on where you live, in some cases, you might have to take time off of work to argue your case in a local courthouse. And you might have to pay a larger fee to file an appeal. In New Jersey, for example, you might pay up to $150 to appeal your property tax bill, depending on the assessed value of your home.

Now, this isn’t to say you shouldn’t file a property tax appeal if you have the data to back up your argument. But before you spin your wheels trying to find that data, you may want to consider saving yourself the work and aggravation of filing a property tax appeal this year — especially if you can reasonably afford your bill.

What’s more, it’s probably not worth your time to file a property tax appeal unless you’re arguing down a large sum. Getting your assessment knocked down from $500,000 to $450,000 could have a big impact on your property tax bill. But working hard to lower your assessment from $500,000 to just $490,000 may not be worth your time and effort. Even in the case of a 2% tax rate, you’re looking at saving $200. Given that you might spend a chunk of that on a filing fee itself, the financial upside may be quite limited.

Our picks for best tax software

Our independent analysts pored over the perks and user reviews for the most popular tax provider services to land on the best-in-class picks to file your taxes. Get started by reviewing our list of the best tax software.

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Almost 8 in 10 Americans had packages stolen from their doorsteps last year. 

Online shopping can save you time and money, and is often more convenient. That is, as long as your package doesn’t get stolen from your doorstep, something that’s happening to more and more people.

Sadly, the growth in online shopping has brought with it an increase in package theft. Porch pirates — robbers who steal online deliveries — made away with 260 million packages last year. According to Safewise, that was almost 25% more than the year before, and the trend shows no signs of slowing. So how common is it and how can you protect yourself?

How common is porch piracy?

There’s no database tracking this particular crime, making it difficult to know the scale of the problem. However, Safewise estimates around $19.5 billion is lost to package theft every year. Its survey showed that 79% of Americans were victims of porch pirates in 2022, and that over half of them had more than one package stolen.

These were the five worst metro areas for porch pirating last year:

San Francisco-Oakland-San Jose, CaliforniaSeattle-Tacoma, WashingtonAustin, TexasHartford and New Haven, ConnecticutSacramento-Stockton-Modesto, California

The metro areas with the fewest porch pirating cases were:

Miami-Fort Lauderdale, FloridaTampa-St. Petersburg (Sarasota), FloridaRaleigh-Durham (Fayetteville), North CarolinaOrlando-Daytona Beach-Melbourne, FloridaCleveland-Akron (Canton), Ohio

How you can protect yourself from porch pirates

You may not be able to get a refund or replacement if you’re the victim of porch piracy. Some retailers may help, and according to Forbes, several shipping giants have implemented their own programs against theft. These include package tracking and emailed alerts for delivery. You may also be able to claim on your homeowners insurance or rental insurance, depending on the value of your package and the cost of your deductible. Here are some tips to keep your packages from being stolen.

1. Plan your deliveries

If possible, get parcels delivered while you are at home. It isn’t always possible to do, but you can often schedule deliveries for a time that’s convenient. Another option? Get them delivered to your workplace. You might also require a signature on delivery so the package can’t just be left on your doorstep. Bear in mind that this may entail a fee.

2. Use local pick-up options

Sure, picking up a parcel at a local hub is more hassle than having it left on your doorstep. But they are also more secure. There are pickup locations like Amazon Hub spread throughout the country, so have a look at what’s available when you check out. If there’s one nearby, it means you can collect your package yourself and reduce the risk of theft. I was pleasantly surprised by how easy it was to do this for one of my recent deliveries.

3. Install cameras and/or floodlights

There are several security options that won’t break the bank and can be a big deterrent to potential thieves. If you don’t want to go the whole hog and install security cameras, consider a video doorbell. You can get one online for around $100 and features vary from model to model. Plus, some come with motion sensors so you’ll know when there’s someone outside your house. Some models let you talk to the visitor as well.

The presence of any form of security, such as a camera, could put off porch pirates. Similarly motion-sensor lights will make your front door less appealing to criminals who prefer to skulk in the dark. Whether it’s porch pirates or other types of thieves, motion detector lights can make a difference.

4. Consider a lockbox

Like cameras and floodlights, there are a range of lockboxes on the market at different price points. They work in different ways — you might get one with an electronic code that you share with the delivery person, or a door system that means packages can go in but not be taken out. Be aware that lockboxes aren’t super cheap, so you might only consider them if you regularly buy expensive goods online.

5. Talk to your neighbors

One of the most cost-efficient ways to guard against porch pirating is to come to an agreement with your neighbors about packages. It won’t work if nobody’s at home during the day, but you may have a neighbor who doesn’t mind signing for the occasional parcel. Just be careful not to exploit the situation — nothing destroys neighborly relations like getting them to receive all your holiday shopping.

Bottom line

There’s often a trade off between security and convenience, but it is worth taking steps to protect your deliveries. Particularly given this type of crime is rising and there are no guarantees you’ll get your money back. If your bank account balance won’t stretch to cover extra security measures, consider using delivery hubs or making sure someone’s in to receive your parcel.

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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. Emma Newbery has positions in Amazon.com. The Motley Fool has positions in and recommends Amazon.com. The Motley Fool has a disclosure policy.

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Stay-at-home parents and their families need to read this. 

Life insurance provides a death benefit when the policyholder dies. Many people buy life insurance because they have loved ones, such as a spouse or children, who are reliant on them for income. The death benefit can pay out and help surviving family members cover the bills.

But what about people who don’t earn income, such as stay-at-home parents? At first glance, it may seem like they don’t really need coverage since they aren’t bringing money into the household. But failing to buy a policy on them could be a big mistake — at least according to finance expert Dave Ramsey.

Ramsey thinks stay-at-home parents should have life insurance

When it comes to the question of whether a stay-at-home parent should have life insurance, Ramsey has a clear and unequivocal answer. Yes — they need coverage. In fact, he recommends buying a policy with a death benefit that will pay out between $250,000 and $400,000.

It may seem odd to pay premiums to get such a large payout if someone passes away when they weren’t earning any income. But, just because a stay-at-home parent doesn’t have an outside paycheck, doesn’t mean their work doesn’t have actual monetary value.

“If the stay-at-home parent up and disappeared, how would all that food making, calendar managing, kid toting, house scrubbing, and errand running get done?” Ramsey asked. “By paying someone else (likely multiple people!).”

Ramsey explained that being a stay-at-home parent is a “ton of work,” which is obvious to anyone who has ever taken care of a child or a household for even a few hours. This work would still have to be done if the parent passed away, and without life insurance to provide funds to help cover things like daycare or house cleaning, the surviving parent would be left facing a huge burden on their time and money during a very difficult time.

Is Ramsey right?

When it comes to buying life insurance on stay-at-home parents, Ramsey is absolutely 100% correct. Any household with a caregiver at home should get life insurance coverage right away.

In fact, this advice doesn’t just apply to people who are taking care of kids, but it applies to anyone who offers valuable services to loved ones — even if those services are unpaid. If a person takes care of aging family members, for example, it would be important to have life insurance coverage on them because if they passed, the older relatives would need to go into a nursing home or get home care.

Ramsey’s recommended amount can provide a rough estimate, but each individual person should think about what it would cost to care for their loved ones when deciding the right amount of coverage. While buying too much coverage comes with needlessly expensive premiums, it’s important not to buy too little.

Take the time to consider the cost of replacement services ASAP if there is an uninsured caregiver in the family. It’s important to get covered right away, before surviving loved ones are left with serious regrets in the event of a tragic death.

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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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