Markus Andrews

Smart Tax Planning

House lawmakers are weighing relief for a “marriage penalty” that impacts the federal deduction limit on state and local taxes, known as SALT. 
The bill would temporarily double the SALT deduction limit to $20,000 for married couples filing together with an adjusted gross income of less than $500,000, starting after Dec. 31, 2022, and before Jan. 1, 2024.
While the bill doesn’t have broad support, it could help shape future tax policy discussions, experts say.

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House lawmakers are weighing relief for a “marriage penalty” that impacts the federal deduction limit on state and local taxes, known as SALT. While the bill doesn’t have broad support, it could help shape future tax policy discussions, experts say.
Enacted via the Republicans’ 2017 tax overhaul, there’s currently a $10,000 cap on the federal deduction for SALT, which has been a key issue for certain lawmakers in high-tax states, such as New York, New Jersey and California. Without changes from Congress, the $10,000 limit will sunset after 2025 and there will be no deduction cap.

Known as the SALT Marriage Penalty Elimination Act, the House bill would double the limit to $20,000 for married couples filing together with an adjusted gross income of less than $500,000. The change would be temporary and retroactive, starting after Dec. 31, 2022, and before Jan. 1, 2024.

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Since 2018, filers who itemize deductions can’t claim more than $10,000 for SALT, which includes property and state income taxes —and some lawmakers argue this penalizes married couples who file joint returns since each taxpayer could claim $10,000 as single filers.
Lawmakers on Wednesday afternoon will cast a procedural vote on the bill for future House consideration. 
“There hasn’t been a lot of consensus on what the design of the SALT cap may look like post-2025,” said Garrett Watson, senior policy analyst and modeling manager at the Tax Foundation. “This helps establish the beginning of the conversation.”
As discussions continue about expiring Tax Cuts and Jobs Act provisions, the SALT cap “is going to be one of the biggest sticking points,” he said.

SALT primarily benefits wealthy households

While supporters of SALT reform have touted the benefit for middle-class families, the current bill would primarily benefit wealthier households, according to a new Tax Policy Center analysis.
If enacted, more than 90% of the benefit from the temporary change would accrue to households making between $200,000 and $1 million, the findings show.
“The wealthy already came out pretty well from the Tax Cuts and Jobs Act and this is just giving them a little bit extra,” said John Buhl, senior communications manager at the Urban Institute.

The wealthy already came out pretty well from the Tax Cuts and Jobs Act and this is just giving them a little bit extra.

Senior communications manager at the Urban Institute

There were similar findings from a recent Tax Foundation analysis, which noted that taxpayers who itemize deductions and have more than $10,000 in SALT expenses are generally higher earners. 
The Tax Foundation analysis found the proposal would boost after-tax income for the top 20% of taxpayers by 0.3%, while the bottom 40% of households “would see little change.” More

Problems with the new FAFSA have frustrated many students and families. But that also makes this the year to ask for more money.
Schools are often receptive to appeals for more aid; they just don’t advertise it, experts say.

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Above all else, the new Free Application for Federal Student Aid was designed to improve college access.
However, problems with the rollout have left many students and their families frustrated, with fewer students applying overall. As of the last tally, nearly 4 million students have submitted the 2024-25 FAFSA form so far.  

That’s a fraction of the 17 million students who use the FAFSA form in ordinary years, according to the U.S. Department of Education.
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Higher education already costs more than most families can afford, and college costs are still rising. Tuition and fees plus room and board for a four-year private college averaged $56,190 in the 2023-2024 school year; at four-year, in-state public colleges, it was $24,030, according to the College Board.
For most students and their families, the amount of financial aid offered and the breakdown between grants, scholarships, work-study opportunities and student loans are key to covering the tab.
This year, those award letters are likely to look a lot different — and those changes open the door for families to ask for more college aid, experts say.

“Every student should anticipate doing an appeal this year,” said Bethany Hubert, a financial aid specialist with Going Merry by Earnest, although not every student may need to submit one.

What’s changed with the new FAFSA

The simplified form now uses a new calculation called the “Student Aid Index” to estimate how much a family can afford to pay.
Under the new system, more low- and moderate-income students will have access to federal grants, but the changes will reduce eligibility for some wealthier families.
And, as part of the FAFSA simplification, families will no longer get a break for having multiple children in college at the same time, effectively eliminating the “sibling discount.”

‘Sibling discount’ change makes a ‘good case’ to appeal

The new FAFSA “is going to benefit low-income students, less so for wealthier students — that’s kind of the redistribution we would want, to some extent,” said Menaka Hampole, assistant professor of finance at Yale School of Management.
However, as a result, some families may find their financial aid award letter does not live up to their expectations, especially if there are other siblings in college.
“There is a good case” for making an appeal, Hampole said. “The question is whether people know that they can.”
Whether you are already enrolled in college or an incoming freshman, schools are often receptive to appeals for more aid; they just don’t advertise it, experts say.  

How to appeal for more college aid

“If the new FAFSA impacted you, for example, you no longer qualify for the sibling discount, colleges do have the ability to take that into account,” Hubert said. “That is something families can reasonably ask for.”
“The first step is always going to be: Reach out to the financial aid office and ask them about their process,” Hubert advised. Then, start preparing your appeal.
If there are need-based issues beyond what was noted in the financial aid paperwork, such as another sibling in college or changes in your financial circumstances, that should be explained to the school and documented, if possible.

Alternatively, if the financial aid packages from other, comparable schools were better, that is also worth bringing to the school’s attention in an appeal.
“When you combine that with a student showing a lot of interest, sometimes a school will be willing to adjust the financial aid package, particularly at private schools,” said Eric Greenberg, president of Greenberg Educational Group, a New York-based consulting firm.
“Most people would not even think of doing that,” he added, but “very often it’s helpful to appeal.”
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The share of homes owned by Black people remained about the same between 2021 and 2022, according to a recent study by LendingTree.
“The data indicates that Black folks are probably going to face disproportionately steep hurdles that stand in the way of them becoming homeowners,” said Jacob Channel, a senior economist at LendingTree.

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Homeownership is out of reach for many Americans — especially for Black Americans.
In the country’s largest metropolitan areas, Black people own a disproportionately small share of homes relative to population size, according to a new report from LendingTree.

In 2022, Black people made up an average of 14.99% of the population across the 50 largest metropolitan areas of the U.S., but owned an average of 10.15% of owner-occupied homes in such places, the report found. Those figures are roughly flat from 2021.
“Relatively speaking, Black people don’t own that many homes,” said Jacob Channel, a senior economist at LendingTree who authored the study.
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In Memphis, Tennessee, Black people make up nearly half the population, the largest share among all metros in the study. But they only own about 36% of homes in the area, LendingTree found.
LendingTree analyzed the U.S. Census Bureau’s 2022 American Community Survey with one-year estimates. The study ranks the nation’s 50 largest metropolitan statistical areas by the difference between the percentage of owner-occupied homes in a metro owned by those who identify as Black and the share of an area’s population that identifies as Black.

Black people face ‘disproportionately steep hurdles’

“The data indicates that Black folks are probably going to face disproportionately steep hurdles that stand in the way of them becoming homeowners,” said Channel.
One of the hurdles is the income disparity. The median income for Black U.S. households was $51,374, about $29,000 less than the $79,933 median income for white U.S. households, according to the latest U.S. Census Bureau data.
While 51% of Black U.S. households in 2022 made at least $50,000 a year, the shares dwindle as the salary increases, Pew Research Center found. About 34% of Black households made $75,000 or more while 22% made $100,000 or more.
“They tend to have less household wealth, less access to intergenerational wealth,” Channel said.
A lower income can make it harder to save for a down payment and to qualify for a mortgage, especially when both home prices and interest rates remain elevated despite subtle declines.

Another element that comes into play is the tax system.
The tax code has a mortgage interest deduction that “overwhelmingly benefits people who can already afford a home,” said Sarah Hassmer, the director of housing justice at the National Women’s Law Center, a nonprofit organization based in Washington, D.C.
“There are some localities [offering] down payment assistance programs, which are a promising practice, but that is not a lived reality in our federal tax code yet,” Hassmer said.
Down payment assistance is a form of direct payment program that can help people who can already afford a monthly mortgage payment. However, the initial down payment is often the barrier of entry, Hassmer said.
While there are many more structural hurdles that impede homeownership for Black people in the U.S., experts agree that it’s important to keep focus on the issue.
“It’s not going to disappear overnight,” Channel said. “We can’t just burry our heads in the sand and hope and pray one day racial inequality in the U.S. suddenly disappears. That’s obviously not going to happen unless we really work towards it.” Don’t miss these stories from CNBC PRO: More

The age at which you decide to claim Social Security benefits is one of the biggest decisions you will make in retirement.
Here’s what you need to know about getting the biggest benefit checks possible.

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How to find your Social Security full retirement age

If you were born between 1943 and 1954, your full retirement age is 66.

If you were born in 1960 or later, your full retirement age is 67.
The full Social Security retirement age gradually increases from 66 to 67 for people born between those years.

Social Security full retirement age

Year of birth
Social Security full retirement age

1943-1954
66

1955
66 and two months

1956
66 and four months

1957
66 and six months

1958
66 and eight months

1959
66 and 10 months

1960 and later
67

Source: Social Security Administration

For some people, this can come as a surprise, because they may still confuse their Social Security full retirement age with the Medicare eligibility age of 65, according to Elsasser.
Others are familiar with their full retirement age because they have been seeing it on their Social Security statement over the years, he said.
Social Security statements can be accessed online by creating a My Social Security account.

How Medicare can trip up retirees in other ways

It’s not just the Medicare eligibility age that can trip up prospective Social Security retirement beneficiaries, Elsasser noted.
Retirees may be tempted to sign up for Social Security when they become eligible for Medicare at 65 so they do not have to write checks to cover their premiums. Those payments for Medicare Part B — which covers doctor’s visits, outpatient care and preventive services — are typically deducted directly from Social Security benefit checks.
But tying those decisions to each other will result in permanently reduced Social Security benefits, since that would be before full retirement age.
“You really should make those decisions independently of each other,” Elsasser said.

Of course, not everyone can or should delay claiming Social Security retirement benefits. The earliest eligibility age is 62, and experts say claiming then may make sense for individuals in some circumstances, such as if they have a poor health prognosis.
By waiting until full retirement age, you can receive up to 100% of the benefits you’ve earned.
If you delay claiming past your full retirement age and up to age 70, you stand to get an 8% benefit increase per year.
A better way to think about it is that each month you delay is worth two-thirds of 1%, Elsasser said. Therefore, even delays of small increments can help increase your monthly checks over your lifetime.
The full retirement age may be subject to go up again, depending on whether Congress decides to include that change to shore up Social Security’s funding woes.
However, such a change would likely affect only prospective retirees ages 55 and younger, Elsasser predicted, and isn’t necessarily a sure thing, as life expectancy in the U.S. is no longer accelerating. More

Community college may not be the stepping stone to college many people think it is, new reports show.
Just 16% of students who start at a community college earn a bachelor’s degree within six years.
Research shows that students who complete an associate’s degree at a community college before transferring have higher success rates, as do students who start coursework in high school through dual enrollment.

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Going to community college and then transferring to a four-year school is often considered one of the best ways to get a degree for significantly less money.
More students are choosing community college at the outset. Enrollment last fall at community colleges rose 2.6%, far more than any other institution type, according to the National Student Clearinghouse’s latest research.

However, nationwide, only about one-third of students who start at community colleges ultimately transfer to four-year schools, and fewer than half of those transfer students earn a bachelor’s degree within six years.
That means just 16% of all community college students attain a bachelor’s degree, according to recent reports by the Community College Research Center at Columbia University, the Aspen Institute College Excellence Program and the National Student Clearinghouse Research Center.
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“Students often believe their chances of success are much greater than they are — that’s terribly unfortunate,” said Josh Wyner, executive director of the Aspen Institute College Excellence Program.
Further, among low-income students and students of color, the numbers are even more stark: 11% of low-income students transfer and complete bachelor’s degrees in six years, while for Black students, the share drops to just 9%.

Meanwhile, 69% of students who start at a four-year public university complete their degree within six years. At four-year private schools, the completion rate is 78%.
“Too many students are failed by policies and practices that dictate whether and how effectively students transfer from community colleges to universities, particularly students from historically underserved groups,” said Tatiana Velasco-Rodriguez, lead author of the reports and a research associate at the Community College Research Center.

When transferring from community college works

The transfer process can work, experts also say.
Research shows that students who complete an associate’s degree at a community college before transferring have higher success rates, as do students who start coursework in high school through dual enrollment.
Students who begin on a more structured pathway and who benefit from additional resources and advice ultimately do better, according to Velasco-Rodriguez.
To improve transfer outcomes across the board, “we need to apply that to other students,” she said.
However, that responsibility should fall on colleges and universities, rather than high school seniors and college-level freshmen, she added. “This is a call to the higher education system to figure out how to serve your students.”

State-based policies can help

Some states already have better systems in place to support the transfer process and at least 35 states even have policies that guarantee that students with an associate’s degree can then transfer to a four-year state school as a junior.

“There are states like Florida that have very good transfer policies and they tend to do better than the national average,” said the Aspen Institute’s Wyner.
To transfer to the University of Central Florida, for example, community college students sign up for a program called UCF Connect, and they are guaranteed admission if they earn their associate’s degree.
Still, many states don’t track how students are doing once they transfer to a four-year institution, the experts also noted, which is key for improving outcomes across the board.
“The real question is how community colleges and four-year universities can partner to make good on their promise,” Wyner said.
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Smart Tax Planning

Recent IRS enforcement has targeted high-income individuals, large corporations and complex partnerships.
However, average taxpayers could still face an IRS audit for certain tax issues, experts say.

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As Americans file returns this season, some worry about IRS audits amid agency efforts to ramp up service, technology and enforcement.
Recent IRS enforcement has targeted high-income individuals, large corporations and complex partnerships. But everyday filers could still face an audit — and certain issues are more prone to IRS scrutiny, experts say.

You don’t want to face the “audit lottery,” warned Ryan Losi, a certified public accountant and executive vice president of CPA firm Piascik.

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Audit rates of individual income tax returns decreased for all income levels from tax years 2010 to 2019, largely due to lower IRS funding, according to a report from the Government Accountability Office.
The IRS audited 3.8 of every 1,000 returns, or 0.38%, during fiscal year 2022, down from 0.41% in 2021, according to a 2023 report from Syracuse University’s Transactional Records Access Clearinghouse.
But many Americans could have a “false sense of comfort” about their personal audit risk, according to Mark Steber, chief tax information officer at Jackson Hewitt.
Here are some of the biggest IRS audit red flags. 

1. Missing income

For many taxpayers, missing income is easy for the IRS to catch because of so-called information returns, which are tax forms that employers and financial institutions send to the agency.
For example, you may have freelance income reported via Form 1099-NEC or investment earnings on Form 1099-B.
Steber said “mismatched data” is the No. 1 thing that gets taxpayers into trouble. “If you leave stuff off [your return], that could get a question,” he said.

2. Unreasonable tax breaks

Another red flag could be excessive deductions compared to what’s considered normal for your income level, according to Losi.
For example, if your adjusted gross income is around $100,000, but you’re claiming itemized deductions — such as the charitable deduction — similar to million-dollar filers, that could raise eyebrows, he said.
“You need detailed substantiation,” because if you can’t prove you qualify for a tax break during an audit, you could lose the deduction, Losi said.

You need detailed substantiation.

Executive vice president of Piascik

3. Round numbers

Accuracy is critical when filing your return and experts recommend using actual expenses rather than estimates for tax breaks.
When claiming four- or five-digit deductions, it’s “very unlikely” your expenses will be round numbers, Losi said. “You’re opening yourself up to be part of the audit lotto when you do that,” he said.

4. Earned income tax credit

The earned income tax credit, a tax break for low- to moderate-income workers, has historically been scrutinized “because the refundable part attracts certain bad actors,” said Steber.
It’s a complex credit with a high “improper payments rate,” National Taxpayer Advocate Erin Collins wrote in her 2023 Purple Book of legislative recommendations.
While higher earners are more likely to face an audit, EITC claimants have a 5.5 times higher audit rate than the rest of U.S. filers, partly because of improper payments, according to the Bipartisan Policy Center.
However, starting in fiscal 2024, the IRS said it would “substantially” reduce the number of correspondence audits, or audits by mail, for filers claiming the earned income tax credit. More

The Saving on a Valuable Education, or SAVE plan, can cut borrowers’ monthly payments in half, and leave many people with a $0 bill.
Instead of paying 10% of your discretionary income a month toward your undergraduate student debt under the previous Revised Pay As You Earn Repayment Plan, or REPAYE, borrowers will be required to pay just 5% of their discretionary income.
Here’s what to know.

A row of townhouses in Alexandria, Virginia.
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A new, more affordable repayment plan for federal student loan borrowers may come with another advantage: It could make it easier to become a homeowner.
The Saving on a Valuable Education, or SAVE plan, can cut borrowers’ monthly payments in half, and leave many people with a $0 bill. The Biden administration officially rolled out “the most affordable repayment plan yet” over the summer.

“Switching to a repayment plan that has a lower monthly payment can help a borrower qualify for a mortgage,” said higher education expert Mark Kantrowitz.

Half of student loan borrowers — including 60% of millennial borrowers — who haven’t yet purchased a home say their education debt is delaying them from doing so, according to a 2021 report by the National Association of Realtors.
Here’s how the SAVE plan could soon change that, experts say.

Smaller payments can help prospective homebuyers

Your debt-to-income ratio, which is usually calculated by dividing all your monthly debts by your monthly income, is a key factor in mortgage underwriting, said Christelle Bamona, a senior researcher at the Center for Responsible Lending.
“Those eligible for SAVE will experience reduced payments, which will in turn lower their debt-to-income ratio,” Bamona said. Most borrowers should qualify for the SAVE plan as long as their loan is in good standing.

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Borrowers making payments on their student debt who enroll in SAVE could see their ratio fall somewhere between 1.5% to 3.6%, according to a new report by the Center for Responsible Lending.
Here’s how that happens.
For one, the SAVE plan increases the income exempted from your payment calculation to 225% of the poverty line, from 150%. As a result, the first roughly $33,000 of your income won’t be factored into your monthly obligation, up from around $23,000 on the other income-driven repayment plans. These numbers represent single individuals. More income is protected as family size increases.

Starting in July, an even bigger perk of the plan will be available.
Instead of paying 10% of your discretionary income a month toward your undergraduate student debt under the previous Revised Pay As You Earn Repayment Plan, or REPAYE, borrowers will be required to pay just 5% of their discretionary income. The SAVE plan has replaced REPAYE.
Kantrowitz provided some examples of how much borrowers could see their bills drop.
Previously, someone who made $40,000 a year would have a monthly student loan payment of around $151. Under the SAVE plan, their payment would fall to $30.
Similarly, someone who earned $90,000 a year could see their monthly payments shrink to $238 from $568, Kantrowitz said.

In the past, most mortgage lenders assumed that a borrower’s monthly student loan payment was a certain percentage of their loan balance, even if the actual payment was lower, Kantrowitz said.
Fortunately, he said, “They now base it on the actual loan payment.”
There’s one catch: Many mortgage lenders won’t use a $0 monthly student loan payment in their underwriting process, which the SAVE plan could leave many borrowers with. In such cases, lenders may still calculate your monthly obligation as a share of your total debt.
The Center for Responsible Lending wants to see this change.
“By not counting their monthly payments as $0 in the underwriting process, lenders are artificially inflating consumers’ monthly debt obligation,” Bamona said. This could potentially prevent millions of low-income Americans from getting a mortgage, she added.

Saving for a down payment may be easier under SAVE

The SAVE plan may also help more people get in financial shape to buy a house, experts say. That’s because a smaller monthly payment could enable them to direct more cash to their savings, and reach their down payment goal faster.
Student loan borrowers who are first-time homebuyers may also be eligible for financial assistance, Bamona said, and should research their options.
“Grants or down-payment assistance programs may be accessible to first-time homebuyers, provided by agencies and organizations within their state or municipality,” she added.Don’t miss these stories from CNBC PRO: More

High inflation has prompted some food companies to shrink the size of their products.
Now President Joe Biden is calling for them to put a stop to that practice.

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President Joe Biden took to social media ahead of the Super Bowl on Sunday to take a jab at snack companies that are giving consumers less food for their money.
The phenomenon called shrinkflation — where consumer products become smaller in quantity, size or weight while their prices stay the same or increase — is a “rip off,” Biden said.

“Some companies are trying to pull a fast one by shrinking the products little by little and hoping you won’t notice,” said Biden, who called for the companies to put a stop to the practice.
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Shrinkflation is showing up in subtle ways as sports drinks get smaller, bags of snacks have fewer chips and ice cream cartons shrink in size, Biden noted.
“The American public is tired of being played for suckers,” Biden said.

How shrinkflation, inflation are tied

The downsizing of products is nothing new and has been going on since the 1950s, according to Edgar Dworsky, a consumer lawyer and founder of the website Consumer World, who has spoken out against shrinkflation for decades.

These tactics tend to become more prevalent during times of high inflation, Dworsky said.
As prices on grocery store shelves and elsewhere have shot up, many consumers are more sensitive now to how much they are getting for their money.
Shrinkflation videos have trended on TikTok. Meanwhile, a 2022 Morning Consult poll found 64% of all adults said they are worried about it.

The president is the newest critic in Washington of shrinkflation.
In December, Sen. Bob Casey, D-Pa., spoke out against the practice with the release of a report that detailed its effects.
“This corporate greed is one of the reasons that Americans are frustrated by expensive grocery bills,” Casey said in a December statement.
Household paper products saw the biggest jump, with a 10.3% measured price increase attributable to shrinkflation, according to Casey’s report, based on data from the U.S. Bureau of Labor Statistics.
Snacks were the next category, with a 9.8% spike attributable to shrinkflation; followed by household cleaning products, 7.3%; coffee, 7.2%; and candy and chewing gum, and ice cream and related products, each with 7%.
Dworsky said he currently has a list of about nine item changes that he has been tracking since December. One of his investigations last year found consumers were getting short-changed on the number of chocolates in Valentine’s Day cardboard heart boxes.
“I’m hoping with inflation subsiding a little bit that we’ll see fewer examples, but it’s never going to go away,” Dworsky said.

How consumers can limit the effects of shrinkflation

The best approach consumers can take is to stay aware of the issue, Dworsky said.
For products you buy regularly, monitor the net weight. If a tube of toothpaste shifts from 3.9 ounces to 3.5, you may want to consider buying a competing brand that has not downsized yet, Dworsky said.
Also keep in mind that gravitating toward certain product sizes with names like “fun size” or “family size” may lead you to still buy a product out of habit even after it shrinks.

If you write a letter to the manufacturer to complain, it’s unlikely you will get them to change back to the old size, he said.
“You may get some coupons in the mail, which is always nice,” Dworsky said.
Still, Dworsky said he was thrilled when Biden’s video went live on Sunday.
“To see the president trying to educate the public about shrinkflation and to call on manufacturers to voluntarily curtail the practice, who could ask for more?” Dworsky said.Don’t miss these stories from CNBC PRO: More