Do You Have to Pay Tax on Interest From High-Yield CDs?
Certificate of deposit (CD) accounts have become far more popular over the past couple years, and it’s easy to see why. As the Federal Reserve has hiked the benchmark federal funds rate in an effort to combat inflation, CD yields have risen sharply. It is now possible to get a 1-year or 2-year CD with a yield significantly greater than 5% — a solid return for a risk-free investment.However, with many people adding CDs to their saving and investing strategies for the first time, it’s important to know what it could mean for your tax bill.Is CD interest taxable?The short answer is yes. Interest you earn from a CD, is considered “interest income” in the eyes of the IRS, and is therefore subject to federal income tax.Not only that, but interest income is taxed as ordinary income. While capital gains and qualified dividend income is taxed at preferential rates in most cases, interest income is taxed according to your marginal tax rate.One important point is that CD interest is taxable in the year it was paid even if you leave it in the account. It doesn’t necessarily need to be paid directly to you, or even be available for withdrawal without penalty. In other words, if you have a 5-year CD, you’ll have to report the interest you earn every year.CD interest tax reporting requirementsTechnically, you are supposed to report every dollar of taxable income to the IRS. But for practical purposes, the IRS sets minimum thresholds of income that banks, employers, and other entities are required to report.In most cases, if you have earned more than $10 in interest during a single year, the bank or credit union that paid the interest is required to send you a tax document known as a 1099-INT statement. And all taxpayers should know is that if you receive a tax document, it’s a safe assumption that the IRS received a copy as well and knows about the income.Even if your bank doesn’t send you a 1099-INT, or you simply don’t receive one in the mail for one reason or another, you’re required to report interest income of $10 or more. This is a fairly low threshold, and it means that if you owned a CD with at least a few hundred dollars in it during 2023, there’s a strong probability you’ll have reportable interest income.Can you avoid paying tax on your CD interest?There are some situations where you might be able to reduce your tax bill, or even avoid taxes on your CD interest entirely. As one example, if you pay an early withdrawal penalty for taking money from a CD early, it can be deducted from your taxable income, even if it exceeds the interest income you earned.Another way to avoid taxes on CD interest is to use a tax-advantaged retirement account, such as a traditional or Roth IRA. Many banks allow customers to open an IRA, and many of the top online brokerages offer a selection of CDs issued by several different banks. For the 2023 tax year, you can contribute as much as $6,500 to IRAs, or $7,500 if you are 50 or older, and you might even be able to deduct the amount of money you put into the account and avoid taxes on interest income. Keep these tips in mind if you’re hoping to lower your tax bill for the CDs you own.
Surprise Amenities You Didn’t Know Business Class Offered
By: Brittney Myers | Updated – First published on Nov. 12, 2023
Many of the perks of flying business class on long-haul flights are well known. The lie-flat seats, for instance, are an iconic image of flying in luxury. And let’s not forget the multi-course meals featured in so many social media posts.These flashy amenities may be Insta-worthy, but they’re not the only pros to flying business class. Here are some of the lesser-known amenities you may also enjoy.1. Priority check-inThe benefits of business class start long before you board the plane. And it all begins at the check-in counter. Many airlines offer accelerated check-in and baggage handling, with dedicated counters for business and first-class passengers. This is obviously less important to folks who check in online and don’t check any baggage. But if you’re taking a long-haul flight, chances are good you have some luggage to check. Being able to waltz past the lines and crowds to check your bags gets the trip off on the right foot.2. Expedited security screeningSpeaking of long lines…not looking forward to waiting in the ones for security? You may not have to if you’re flying business class. Some airlines offer an expedited security line for frequent flyers, including some business class passengers, that can get you through in a fraction of the time. Whether there is an expedited security line will depend on the airport and airline. It’s worth asking at the check-in desk if the service is available (and where to go if it is).Pro tip: You don’t need business class tickets to get through security faster. TSA PreCheck can help you sail through security once you’ve qualified. Even better, a lot of travel rewards cards will pay for it.3. Lounge accessA fantastic feature offered by many airlines for international business class is access to the airline’s lounge. This is especially appreciated when it’s an airline with lounges I wouldn’t normally be able to access with my credit cards.It’s important to note that not all upper class tickets get lounge access. And not all lounge access is made equal. Here are some general considerations:Domestic first class typically won’t get you into the lounge.International business or first class nearly always have lounge access.If your airline doesn’t have a lounge, you may still have access to partner lounges.Even business class doesn’t get you into the most exclusive lounges. For example, American Airlines Flagship First international first class passengers have access to dedicated Flagship First lounges in several airports.4. Dedicated flight attendantsOne of the reasons business class service is so much better than other cabins is the staff. The flight-attendant-to-passenger ratio is simply much lower in business class; in other words, each flight attendant has fewer people to assist. This makes service much faster, as well as more personal. (Don’t discount the personal part; you get to know each other well over the course of an eight-hour flight.)5. Toiletries and pajamasThe big selling point of business class on an international flight is the lie-flat seats that turn into beds. Being able to stretch out completely and sleep is a luxury that cannot be overstated. The only problem? Your toiletries and sleepwear are probably packed.Happily, your business class seat will usually come with a handy little zippered pouch full of helpful toiletries, often including:Lip balmA toothbrushA tube of toothpasteAn eye maskEarplugsSocksBut that’s not all. Some airlines will also offer you a set of complimentary pajamas so you can sleep in comfort. However, unlike the amenity kits, which are often waiting on your seat when you board, you’ll likely need to request a pajama set from a flight attendant.Upgrade to luxuryIf you have to be stuck in a tiny metal tube for an eight-hour international flight, you may as well make that tube as comfortable as possible. Flying business class is how you do just that.The downside to all that luxury? Zeroes. As in, add a couple zeroes onto the end of your ticket price if you want to upgrade to business class. (A quick search right now shows one-way business class fares from the east coast of the U.S. to Europe going for $3,000 and up.)Or, you could use your credit card rewards. Pretty much all of my favorite travel rewards cards come with welcome bonuses large enough that you could get at least a one-way business class flight to most destinations. With a little planning — and some strategic welcome bonuses — you could travel in luxury nearly for free.
Is It Worth Buying a Drink Package on a Carnival Cruise?
If you want to do the math and calculate your savings potential, ask yourself how many of each category of beverage you’d likely order in the average day. Add up the prices and compare it with the per-day cost of the CHEERS! program for your cruise to see if the cost is justified.Of course, there are other benefits of the CHEERS! program to consider. For example, you can order a drink or specialty coffee you aren’t sure you’ll like — and if you don’t like it, simply order another one without wasting any money. And since bottled water is included, you can simply ask for one every time you order a drink and carry them with you throughout your trip.The bottom line is CHEERS! can certainly be worthwhile on your next Carnival cruise, even if you don’t plan to drink a lot of alcoholic beverages. But it depends on your preferences, budget, and how much you’ll utilize the various beverage options that come with it.
7 Habits of the Super Rich You Can Adopt Today
By: Chris Neiger | Updated – First published on Nov. 13, 2023
There’s always room for improvement in life, and when it comes to personal finances, there are plenty of lessons all of us could learn from the super rich.Whether you’re looking for a few tips to help you earn more money or are looking for good habits to improve your life, here’s how the ultra-wealthy spend their time and use their money, according to financial planners.1. They set goals for their dreamsTom Corley, an accountant, financial planner, and author of Rich Habits: The Daily Success Habits of Wealthy Individuals, says that one thing wealthy people do nearly every day is setting goals for things they want to achieve. Corley says that 80% of the wealthy people he interviewed spent an hour a day doing this.Sitting down and putting your ideas down on paper is not only easy to do, but you’re also 42% more likely to achieve your goals if you write them down, according to research from Dr. Gail Matthews.2. They stay out of debtCertified Financial Planner Faron Daugs told CEuroJournal a few years ago that his wealthy clients — who didn’t inherit money — avoid debt and try to pay off what they owe quickly. This may mean avoiding high-interest credit cards and other forms of consumer debt.America’s credit card debt topped $1 trillion recently, indicating that many of us would benefit from developing a strategy to consolidate debt and eliminate it.3. They learn new thingsMost rich people Corley wrote about took an hour daily to learn something new or perfect a skill enough to be proficient. It doesn’t have to be related to your job, either. For example, billionaire and Facebook founder Mark Zuckerberg has learned jiu-jitsu and competes in tournaments.4. They have emergency fundsWhile most financial experts recommend having three to six months’ worth of expenses in a savings account, the wealthy have six to nine months saved up, according to Daugs. If you need help starting your emergency fund, open up a high-yield savings account and aim to save $1,000.5. They exerciseWhile it may not benefit your bottom line — unless you’re a YouTube workout influencer — getting regular exercise is good for your physical health, reduces stress, and helps your mental focus. You don’t need an expensive gym membership either; you can easily meet your fitness goals on a budget.6. They build relationshipsCorley’s research found that 90% of rich people he spoke with spend 30 minutes per day building relationships. Some of it was networking, but others simply made sure to make contact with the people they knew, whether it was for a life event or just to say hello.7. They have additional income streamsThe super rich invest their money and diversify their income streams, such as by owning rental properties. You can start following in their footsteps by buying a few stocks, renting out a room in your home, or starting a side hustle.The super rich take practical stepsYou might have noticed that none of these habits are earth-shattering. Much of the super rich’s habits are just simple, practical steps toward improving their lives.And while most of us don’t have access to the same resources as the ultra-wealthy, it doesn’t mean we can’t learn a few good habits from them. For example, I’ve been considering signing up for an online learning platform, like MasterClass, just for fun. When I came across the research about the super rich learning new skills, it reminded me I should follow through with the idea.There’s likely one habit on this list you might not be putting into practice that you can learn from. I chose learning something new because it was already on my mind…and, maybe, because exercising is hard.
Costco Just Dropped More Early Black Friday Deals. Here Are 3 You Should Check Out
By: Maurie Backman | Updated – First published on Nov. 13, 2023
Black Friday is almost here, and that’s something you may be pretty excited about. But the reality is that you don’t necessarily have to wait for the day after Thanksgiving to arrive to score some great deals at Costco. The warehouse club giant has already released a string of pre-Black Friday deals so you can begin saving right away. Here are three you may want to check out.1. $130 off the Samsung 32″ Class ViewFinity UR90 4K UHD Curved MonitorIf you’ve been looking to upgrade your monitor, now’s a great time to do it. This discounted Samsung model comes with four times more pixels than Full HD for a crisper image on screen. The curved nature of this monitor not only looks sleek, but lends to a better viewing experience to boot.Plus, when you buy electronics from Costco, you get a second year warranty included with your purchase. You also get free tech support should you need it. And if you’re self-employed and are buying this monitor to improve your efficiency at work, you can ask your accountant if it’s possible to write it off as a business expense.2. $100 off the Vitamix E520 Blender BundleIf you’re not familiar with the Vitamix, think of it as a super blender. This model comes with 10 variable speeds plus a pulse feature when you need a lighter touch. The blender also comes with three program settings — smoothies, hot soups, and frozen desserts. The Costco bundle that’s on sale includes a 64-ounce low-profile container and two 22-ounce tumblers with stainless steel straws.If you’ve been looking to buy a Vitamix, now’s a good time to reap some savings. But you should know that this model is a member-only item. Some online Costco deals are made available to non-members, but this isn’t one of them.3. $50 off a two-pack of Oral-B Genius Rechargeable Electric ToothbrushesMany dentists will tell you that brushing with an electric toothbrush is a great way to maintain solid oral health. If you’ve been looking for a pair of electric toothbrushes, consider this bundle from Costco. It features two travel cases and two charging stations. Each brush also comes with six different brushing modes.If you have a flexible spending account you haven’t used up yet, you may be thinking of buying this toothbrush two-pack to spend down your balance in time for the new year. Unfortunately, though, electric toothbrushes are not considered an FSA-eligible expense. Similarly, if you have money in an HSA (health savings account), you should know that an electric toothbrush will not be considered a qualifying medical expense, either.These three items are just a sampling of the pre-Black Friday deals Costco has available online and in stores. It could pay to head over to your local Costco in the next week and see what other deals you can spot. In-store prices are often lower than the prices you’ll see online. So if you want to save the most cash on your pre-Black Friday shopping, that’s really the way to go.
