Investing

Wesleyan University is the latest college to end the policy of giving preferential treatment to legacy students.
Decades-old legacy preferences are increasingly in question after the Supreme Court’s ruling on affirmative action.
Today, more Americans disagree with the practice.

Students at Wesleyan University
Joanne Rathe | The Boston Globe | Getty Images

Decades-old legacy preferences face new challenges

A civil rights group is also contesting the practice of giving priority to the children of alumni at Harvard University, saying it discriminates against students of color by giving an unfair boost to the mostly white children of alumni.
“Your family’s last name and the size of your bank account are not a measure of merit, and should have no bearing on the college admissions process,” Ivan Espinoza-Madrigal, executive director of Lawyers for Civil Rights, said in a statement announcing the civil rights complaint.

More Americans disagree with legacy admissions

Today, fewer Americans agree with legacy admissions.
Three-quarters, or 75%, said whether a relative attended the school should not factor into admissions decisions, up from 68% in 2019, according to a survey by the Pew Research Center.
In its suit against Harvard, Lawyers for Civil Rights said it was challenging the “discriminatory practice of giving preferential treatment in the admissions process to applicants with familial ties to wealthy donors and alumni.”

Legacies are nearly six times more likely to be admitted, the complaint said.
“This preferential treatment overwhelmingly goes to white applicants and harms efforts to diversify color,” added Michael Kippins, litigation fellow at Lawyers for Civil Rights.
Officials at Harvard declined to comment on the complaint.

Challenges to legacy admissions mount

Several bills at the state and federal level have also taken aim at the practice, including a recent proposal in Massachusetts that would charge colleges a fee for considering legacy status or an applicant’s relationship to a past, current or prospective donor.
The NAACP called on more than 1,600 U.S. public and private colleges and universities to commit to increasing the representation of historically underrepresented students and end the practice of legacy admissions.
“That signifies a huge stride toward future insurance that every student, regardless of their race, ethnicity, gender identity, sexual orientation, disability, religion, or socioeconomic status, has an equal opportunity to learn, grow, and thrive at a higher education institution,” Ivory Toldson, director of education innovation and research at the NAACP, said in a statement.

The reality is we’ve reached a pretty good consensus on the use of identity in college admissions.

Alvin Tillery
director of Northwestern University’s Center for the Study of Diversity and Democracy

“There’s no doubt that the legacy advantage is mostly a white entitlement,” said Alvin Tillery, a political science professor and director of Northwestern University’s Center for the Study of Diversity and Democracy.
However, these preferences are not based explicitly on race, which distinguishes the practice from the overt race-conscious admissions programs that were recently rejected by the Supreme Court, noted Don Harris, associate dean and equity, diversity and inclusion liaison at Temple University School of Law.
Yet, “it’s clear that they have a disproportionate impact on race,” added Harris, referring to what Chief Justice John Roberts wrote in his opinion about preventing ways around affirmative action: “What cannot be done directly cannot be done indirectly.”

Legacy admissions ‘could be deemed unconstitutional’

Since the practice of legacy admissions has indirect racial implications, these challenges may have legal merit, according to Jeanine Conley Daves, an attorney at New York-based firm Littler.
If there is no compelling interest for such programs and they are having a negative effect on the college-application process, “then similar to race-conscious admissions programs, it could be deemed unconstitutional,” she said.

“The reality is we’ve reached a pretty good consensus on the use of identity in college admissions,” said Tillery, who is also a Harvard graduate.
“If you can’t use race for Black and Latino students, then you can’t use race for wealthy white students either,” Tillery added.
The advantages that stem from legacy admissions can be hard to quantify but at some of the most selective colleges, legacies comprise as much as 10% to 20% of the incoming class, according to data from The Associated Press.
Subscribe to CNBC on YouTube. More

Banks and businesses are reaching a boiling point over swipe fees, which are charged every time a credit card is used to make a purchase.
This year, swipe fees will drive up the price of school and college supplies more than $3 billion, the Merchants Payments Coalition said.
Electronic transactions are also essential.

This year, consumers are spending more on back-to-school supplies and coughing up more to cover a particular kind of credit card fee at the same time.
Total back-to-school spending is expected to reach a record $41.5 billion with another $94 billion in college shopping, according to the National Retail Federation.

related investing news

The so-called swipe fees, which companies such as Visa or Mastercard charge businesses every time a credit card is used to make a purchase, could drive up the price of school and college supplies more than $3 billion this year, the Merchants Payments Coalition said Thursday.
More from Personal Finance:Here’s the inflation breakdown for June, in one chartEconomists say it’s a near certainty that housing inflation will fallBuying power rose for first time since March 2021 amid falling inflation
“Swipe fees are astronomically high and make everything more expensive,” said Doug Kantor, general counsel at the National Association of Convenience Stores and an executive committee member at the Merchants Payments Coalition.
Swipe fees, also known as interchange fees, have more than doubled over the past decade and jumped $22 billion to a record $160.7 billion last year. When the National Retail Federation first started tracking swipe fees collected by Visa and Mastercard in 2001, they amounted to about $20 billion. 
“That’s a lot of money,” Kantor said. “Bankers skimming off the top of every transaction.”

“They’ve made themselves an involuntary equity partner with every Main Street business,” he added.

Card payments have benefits, too

Banks and card companies charge the merchant about 2% of the transaction, on average, every time a credit card is used to make a purchase. Now, with margins strained, retailers are passing most, if not all, of that cost on to consumers.
But with each credit card transaction comes benefits for businesses, such as higher sales, a larger customer base, fraud protection and guaranteed payment, according to the Electronic Payments Coalition.
“Electronic payments are four times cheaper to process than cash,” said Aaron Stetter, the Electronic Payments Coalition’s executive director. “According to big-box retailers’ own consultants, credit and debit card payments will save them over $7.5 billion on back-to-school shopping this year.” 
However, most of the value is “happening behind the scenes,” he added. “You don’t necessarily see it at the front end.”

“Merchants love to hate them,” said Ted Rossman, a senior industry analyst at CreditCards.com. “But I would argue that credit cards lead to more spending and it’s shortsighted when companies make it harder to use a credit card.”
There are advantages for consumers, as well. Swipe fees largely fund credit card rewards, he added. There are some grocery rewards cards that can earn you as much as 6% back at supermarkets, while a generic cash-back card will earn you 2%.
“There’s a lot to be said about the value of rewards,” he said. “I would be wary of biting the hand that feeds you.”
Subscribe to CNBC on YouTube. More

A new Alzheimer’s treatment will prompt higher Medicare costs.
Beneficiaries may pick up some of the tab through higher Medicare Part B premiums, experts predict.

bymuratdeniz | E+ | Getty Images

One of the costs retirees pay — Medicare Part B premiums — may be increasing in 2024, driven by a new Alzheimer’s treatment on the market.
The Medicare trustees projected in March that the standard monthly Part B premium may increase to $174.80 in 2024, an almost $10 monthly increase from the $164.90 standard monthly premium beneficiaries are currently paying.

Since that prediction, Leqembi, a treatment targeted at early stages Alzheimer’s disease, has come under Medicare coverage following traditional approval from the Food and Drug Administration.
More from Personal Finance:Social Security to have a lower cost-of-living adjustment in 2024Here’s the inflation breakdown for June, in one chartSocial Security phone disruptions have led to longer wait times
Annual spending on the drug may make it the third most costly covered by Medicare Part B, according to KFF, a nonprofit provider or health research. As a result, Medicare Part B premiums — which are expected to cover approximately 25% of the program’s costs — will likely go up.
Leqembi and services related to the treatment may add $5 per month to Part B premiums, bringing the total premium to $179.80 per month, according to a new estimate from The Senior Citizens League, a non-partisan senior group.
Most beneficiaries may see their Part B premium increase by almost $15 per month, while other costs may drive Medicare Part B premiums higher, The Senior Citizens League notes.

Medicare Part B generally covers medical services provided outside of hospitals. Beneficiaries typically pay a monthly fee in the form of a premium, in addition to annual deductible and coinsurance costs.

The estimate is subject to change.
“We’ll know in maybe two to three months what the Part B premium will be for 2024,” said Juliette Cubanski, deputy director of the Program on Medicare Policy at KFF.
If Part B premiums go up next year prompted by the new Alzheimer’s drug, it will not be the first time. There was a 15% bump to Part B premiums between 2021 and 2022, which was “substantially above the norm,” when another Alzheimer’s treatment, Aduhelm, emerged, according to KFF.
However, Part B premiums dropped by 3% for 2023 in response to Medicare’s decision to limit Aduhelm coverage.

How Part B premiums affect Social Security checks

The Senior Citizens League is currently predicting a 3% Social Security cost-of-living adjustment for 2024, based on the latest government inflation data. That would be substantially lower than the record 8.7% increase beneficiaries saw this year.
But just how much more beneficiaries may see in their checks will depend on the size of the Part B premium for next year, according to Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League.

Medicare Part B premium payments are typically deducted directly from monthly Social Security checks. The risk for individuals with lower benefits is that they will see no increase to their benefits after the Medicare Part B premiums are deducted, according to Johnson.
In the past, the combination of the fluctuation of Social Security cost-of-living adjustments and Medicare Part B premiums has led some beneficiaries to see no increase to their monthly checks for two or three years at a time, she noted.
“It can lead to several years of no increases in benefits, even though the real inflation they experience is still occurring,” Johnson said. “It leaves them relying more on savings or going into debt.”

What new treatment means for Medicare patients

Medicare will cover Leqembi for patients with mild cognitive impairment or mild dementia with confirmed amyloid plaques, according to KFF.
It is unknown how many Medicare patients will meet the prescribing requirements for the drug or how many will opt to take it, KFF points out. However, Leqembi and other treatments will likely lead to higher Medicare spending, since the vast majority of patients who would qualify for the drugs are covered by Medicare, Cubanski said.
Leqembi is priced at $26,500 before insurance coverage. Medicare patients may pay more than $5,000 annually for the treatment, according to KFF.

Jasmin Merdan | Moment | Getty Images

That out-of-pocket cost is “conservative,” Cubanski said, and does not include any additional medical services or scans patients who use the treatment would need in order to monitor its effects.
Patients who are prescribed the drug and are covered by original Medicare — Parts A and B managed by the federal government — will pay a 20% coinsurance after they have paid their Part B deductible, according to the Centers for Medicare and Medicaid Services. Other patients who have supplemental coverage or secondary insurance, such as Medigap or Medicare Advantage, may face different costs.
A second Alzheimer’s treatment may be approved for market before the end of the year.
The take up of emerging Alzheimer’s treatments may not be large in the near term due to the trade offs of the clinical benefits with some pretty serious side effects shown in clinical trials, according to Cubanski.
“I think we can expect there to be a lot of discussions between patients and their providers about whether these drugs are worth taking,” she said. More

Frozen vegetable prices are up 18%, on average, over the past year, according to the consumer price index for June 2023.
That increase is larger than all other groceries, and six times the 3% average for all consumer goods and services.
Heavy precipitation in California — the largest U.S. vegetable producer — flooded farmland and reduced crop supply, economists said.
Higher costs for cold storage and ripple effects on food prices from the war in Ukraine have also played a role. Immigration trends among Mexican farm laborers have also put upward pressure on labor costs, said economists.

A man operates the tractor in a vegetable field in Lompoc, California, on April 11, 2023.
Tayfun Coskun/Anadolu Agency via Getty Images

Even as U.S. inflation broadly cools, frozen vegetable prices are hot.
The average shelf price for frozen veggies rose by 18% in the past year — the largest increase among all grocery items, according to the consumer price index for June 2023.

Among all consumer goods and services, only a few — like motor vehicle repair, school meals and tax-return preparation — saw prices jump faster in the past 12 months, according to CPI data.
The price spike on frozen veggies is attributable to many factors, like immigration trends, high costs for labor and fertilizer, and ripple effects from the war in Ukraine, economists and food experts said.
More from Personal Finance:Here’s the inflation breakdown for June, in one chartEconomists say it’s a near certainty that housing inflation will fallBuying power rose for first time since March 2021 amid falling inflation
But perhaps the most consequential event has been unusual weather in California, which is “by far” the biggest supplier of fresh fruits and vegetables in the U.S., said Russell Tronstad, a professor and agricultural economist at the University of Arizona.

Record precipitation ‘provided many challenges’

The Golden State was hit by a deluge of precipitation over the winter. Some areas broke daily rainfall records, and the highest-ever snowpack has been recorded in the Sierra Nevada mountains.

The result: overflowing rivers, mudslides, flooding — and soaked farmland.
“Some areas were just inundated,” which had the effect of decreasing vegetable supply, Tronstad said.

Flooded farm and crops in California’s Central Valley.
Citizen of the Planet/UCG/Universal Images Group via Getty Images

California is the No. 1 national producer for dozens of crops, like broccoli, brussels sprouts, cabbage, carrots, cauliflower, eggplant, kale, lettuce, onions, bell peppers, spinach and tomatoes in processed foods, according to the California Department of Food and Agriculture. It’s the sole producer of crops like celery and garlic.
Overall, the state accounts for nearly half of U.S. vegetable production, according to California Polytechnic State University. It accounted for 42% of total U.S. vegetable sales in 2017, according to most recent data from the Census of Agriculture.
Heavy rain “provided many challenges” for agricultural producers, Pam Knox, an agricultural climatologist at the University of Georgia, wrote recently.
It destroyed crops, delayed planting schedules, and prevented farmers from doing field work for weeks, for example, she said.

War in Ukraine, pandemic effects influence pricing

Flooded farmland, located near the confluence of the Sacramento and San Joaquin Rivers, is viewed from the air on May 22, 2023, near Rio Vista, California.
George Rose/Getty Images

But weather — and its negative impact on crop supply — isn’t the only contributor to higher prices for frozen vegetables.
“The category is impacted by a variety of external factors,” said Alison Bodor, president and CEO of the American Frozen Food Institute.
For example, the war in Ukraine is limiting the supply of commodities like wheat, corn and soy, thereby raising prices for the commodities. The higher prices give farmers a “strong incentive” to plant these commodity products over others (like vegetables), a dynamic that could decrease vegetable supply, Bodor said.
“The costs for commodity crops are related and impacted, thus the cost of specialty crops like vegetables also increase,” Bodor said.

Growers and processors are also coping with other factors like the high costs of cold storage, fertilizer and labor, she said.
Prices for all groceries have been pressured in the pandemic era, due to additional factors like supply-chain issues and fuel costs (to transport crops to store shelves). Grocery prices peaked at an annual inflation rate of 14% in August 2022, the highest since 1979. (They’ve since cooled to below 5%).
“We’re still dealing with these ripple effects from Covid throughout the system,” said Trey Malone, a professor and agricultural economist at the University of Arkansas. “I don’t think we’ve established what the new normal is for consumer food purchases.”

Immigration trends pressure supply of farm laborers

Long-term immigration trends are also serving to put upward pressure on labor costs for farmers, economists said.
Fruits and vegetables are known as “specialty crops,” which are labor-intensive to produce since they are often hand-picked, said Zach Rutledge, an agricultural economist and assistant professor at Michigan State University who specializes in farm labor economics.
Labor can therefore account for a large share of a farmer’s production cost, perhaps up to 40%, Rutledge said.

Some areas were just inundated.

Russell Tronstad
professor and agricultural economist at the University of Arizona

U.S. labor costs have risen at their fastest pace in decades during the pandemic era, as record-high job openings led employers to raise wages to compete for talent.
But farmers face additional cost hurdles. Seventy percent of crop farm workers in the U.S. are foreign-born, according to the 2019-20 National Agricultural Workers Survey; of them, 91% lived in Mexico before arriving in the U.S.
That survey data excludes workers in the H-2A visa program, which the U.S. grants to seasonal farm workers. The number of H-2A workers has tripled over the past decade, and Mexicans received more than 90% of the visas, according to the University of California, Davis.
“The agriculture sector is heavily foreign-born, and heavily from Mexico,” Rutledge said.

Yet that labor supply is under pressure: Until recently, net migration from Mexico to the U.S. flipped negative, starting around the early 2000s. That meant more people left the U.S. for Mexico, reversing decades of positive migration.
Additionally, agricultural labor is “difficult, challenging physical work,” Rutledge said. Some farm workers may have opted for a more pleasant, higher-paying gig elsewhere in a hot U.S. job market — which would further dilute the pool of available workers, he said.
Climate change — and the extreme weather it produces, whether storms in California, drought, or temperate winters that increase populations of invasive pests — also represent a long-term threat to crop prices, Malone said.
“You can bank on having issues with prices and instability, particularly with climate change, for a long time,” he said. “These ecosystems we farm in are super-fragile.” More

Life Changes

The Powerball jackpot ballooned to an estimated $1 billion without a winner on Monday night.
Although it’s the third-largest prize in the game’s history, the winner will pay a sizeable tax bill.
Before collecting the proceeds, there’s a 24% federal tax withholding and the winner likely will owe millions more.
The next Powerball drawing is at 10:59 p.m. EST on Wednesday night.

The Powerball jackpot has reached $1 billion by July 19, 2023.
Scott Olson / Getty

The Powerball jackpot has ballooned to an estimated $1 billion, raising the stakes for the next drawing at 10:59 p.m. ET on Wednesday night.
It’s the third-biggest prize in the game’s history — falling behind the record $2.04 billion jackpot in November and $1.586 billion prize from 2016, according to the Multi-State Lottery Association.

However, the windfall shrinks dramatically after the IRS collects its share of the prize, and state taxes could further reduce winnings.

More from Life Changes:

Here’s a look at other stories offering a financial angle on important lifetime milestones.

If you win, there are two choices for the payout: a lump sum of $516.8 million or 30 years of annuitized payments worth $1 billion. Both options are pretax estimates.
“I’m typically a fan of taking the lump sum,” unless someone prefers the annuity for cash management purposes, said certified financial planner and enrolled agent John Loyd, owner at The Wealth Planner in Fort Worth, Texas.
The reason: You can maximize the winnings by investing the lump sum proceeds sooner, according to Loyd.
Plus, the top federal tax bracket, which currently stands at 37%, could get higher over time, he said. Without changes from Congress, the 37% rate automatically reverts to 39.6% after 2025 when provisions from the Tax Cuts and Jobs Act sunset.

The chances of winning Powerball’s grand prize are 1 in about 292 million.

More than $124 million immediately goes to the IRS

Before seeing a penny of the jackpot, winners pay a sizable tax withholding. Winnings above $5,000 require a 24% mandatory upfront federal withholding that goes straight to the IRS.
If you pick the $516.8 million cash option, the 24% withholding automatically reduces your prize by about $124 million.
However, Loyd warns the 24% withholding won’t cover the entire tax bill because the prize pushes the winner into to the 37% tax bracket.

How federal tax brackets work

Millions in lottery proceeds easily put the winner in the top federal income tax bracket — but that doesn’t mean they’ll pay 37% on the entire prize.
For 2023, the 37% rate applies to taxable income of $578,126 or more for single filers and $693,751 or higher for married couples filing together. You calculate taxable income by subtracting the greater of the standard or itemized deductions from your adjusted gross income.
Single filers will pay $174,238.25, plus 37% of the amount over $578,125. As for married couples filing together, the total owed is $186,601.50, plus 37% of the amount above $693,750.
After the 24% federal withholding, the jackpot winner’s tax bill depends on several factors but could easily represent millions more.

You may also owe state taxes, depending on where you live and where you purchased the ticket. Some states have no income tax or don’t tax lottery winnings, but others have top-income state tax brackets exceeding 10%. 
Powerball isn’t the only chance to strike it rich. The jackpot for Friday night’s Mega Millions drawing now stands at an estimated $720 million. The chance of hitting the jackpot in that game is roughly 1 in 302 million. More

The Supreme Court concluded President Joe Biden didn’t have the power to broadly cancel people’s student debt balances, but his administration is using existing regulatory authority to wipe the debts of over 800,000 people.
Here’s what to know about the $39 billion in relief.

The U.S. Department of Education in Washington, D.C.
Caroline Brehman | CQ-Roll Call, Inc. | Getty Images

Just weeks after the Supreme Court struck down President Joe Biden’s plan to cancel up to $20,000 of their debt, some borrowers got good news: The Biden administration announced it would be forgiving loans for more than 800,000 people, for a total of $39 billion in relief.
What was the connection between these two actions? Very little.

Although the Supreme Court concluded Biden didn’t have the power to broadly cancel people’s student debt balances at the end of June, his administration used existing regulatory authority to carry out the latest relief.
Here’s what to know, and how to tell if you qualify.

Qualifying borrowers have been paying for decades

Unlike Biden’s sweeping student loan forgiveness plan that would have impacted the majority of borrowers, the latest debt cancellation applies only to those who have been making payments for 20 years or 25 years (likely since either 1998 or 2003.)
“This adjustment will provide immediate forgiveness for those that have been paying on their loans for two decades or more, yet still have a balance,” said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit.
Those eligible borrowers were mostly enrolled at some point in what is called the “Income-Contingent Repayment Plan,” said higher education expert Mark Kantrowitz. ICR was the first payment plan available that let borrowers pay what they could afford each month. That’s why most of the borrowers were in this plan: it’s been around long enough for them to have made enough qualifying payments.

More from Personal Finance:Quiet luxury may be Americans’ most expensive trend everCompanies recognize importance of ‘out of office’ timeCash-strapped consumers tip less amid persistent inflation
Borrowers are actually entitled to loan forgiveness under these income-based plans after they’ve made payments for a certain amount of time, typically 20 years or 25 years.
But issues in the lending system resulted in that not happening.
“The loan servicers weren’t keeping track of the qualifying payments,” Kantrowitz said.
The Biden administration remedied this problem by recounting people’s payments and making a one-time adjustment, giving borrowers credit for months that previously didn’t count, including periods spent in certain deferments or forbearances. Late or partial payments were also made eligible.
This brought 804,000 borrowers over the line for forgiveness.

Many kinds of student loans qualify

When borrowers will hear about debt relief

If you’re not sure if you can expect the aid, the U.S. Department of Education said it would alert eligible borrowers within days.
“It will take up to a month after the borrower is notified for the loan cancellation to occur,” Kantrowitz said.
If you qualify for the debt relief but haven’t received it by the time student loan bills resume in October, you won’t be required to make any payments, the U.S. Department of Education says. More

On Tuesday, the U.S. Department of Education is holding a public hearing on its alternative plan to cancel student debt.
This round, President Joe Biden is relying on a different law to try to cancel people’s debt — the Higher Education Act. The Supreme Court has ruled he didn’t have the power to do so under the Heroes Act of 2003.

People rally in support of the Biden administration’s student debt relief plan in front of the the U.S. Supreme Court on Feb. 28, 2023.
Drew Angerer | Getty Images News | Getty Images

Anyone can join: here’s how

The virtual event is free and runs from 10 a.m. until 4 p.m. Eastern time. You can join the public hearing on student loan relief at Eventbrite.

Speakers will each have 4 minutes

Those who wanted to comment at the hearing had to send an email by noon on Monday to negreghearing@ed.gov.
If you didn’t meet that deadline, it should still be an interesting event to listen in on, said higher education expert Mark Kantrowitz.

“They can hear what other people are saying,” he said. Each person should speak for around four minutes.
There will also be a public comment period down the road, Kantrowitz said, during which anyone can submit their preferences and ideas on the subject.

Process could take a year or longer

Tuesday’s hearing should influence Biden’s proposed new rule for delivering people relief. The entire process could take a year or longer, Kantrowitz said.
That’s because unlike with Biden’s first attempt to forgive student debt quickly through an executive order, this time he’s turning to the rulemaking procedure.
“If the Biden administration is successful in providing loan forgiveness under the HEA,” Kantrowitz said, “borrowers could see forgiveness around the time of the election.” More

The number of expat Americans living in Spain grew 13% from 2019 to 2021, according to a Spanish government report.
Among foreign residents, American expats pay the second most for living space per square meter, after the Danes.
Purchasing or living in a home abroad requires a certain level of wealth, given the cost not only of real estate but overseas travel, as well.

A real estate agency window in Alicante, Spain.
Sopa Images | Lightrocket | Getty Images

More Americans are flocking to Spain for longer, whether as so-called digital nomads working abroad or to enjoy a new life in retirement.The number of Americans living in Spain grew by 13% from 2019 to 2021, and home sales to Americans jumped 88% from the first half of 2019 to the first half of 2022, according to a report by the General Council of Notaries in Spain.
Among expat groups buying in the sun-washed country, Americans paid the second most, after the Danes, shelling out up to 2,837 euros, or $3,119, per square meter. In addition, the home prices that grew the most in the same period were paid by Americans, according to the report.

related investing news

9 hours ago

More from Personal Finance:Quiet luxury may be Americans’ most expensive trend everCompanies recognize importance of ‘out of office’ timeCash-strapped consumers tip less amid persistent inflation
Purchasing or living in a home abroad requires a certain level of wealth, given the cost not only of real estate but overseas travel, as well, said Alex Ingrim, a Florence, Italy-based private wealth manager and senior investment analyst at global financial services firm Chase Buchanan.
According to the General Council of Notaries report, American buyers are focusing on urban areas like Madrid — as with any big city, people are attracted to its job opportunities and amenities, said Ingrim.

While the southern coastal region of Andalusia has always been a popular location for Americans, there’s a “strong word of mouth” for the city of Valencia, an urban area on the beach farther north on the Mediterranean coast with a large expat community, among them many Americans, said Ingrim.However, Americans who want a different retirement or remote work experience and an adventure by relocating to Spain should take a few factors into consideration.

Property taxes in Europe are different

Most tax on property purchased in Spain is paid upfront in a stamp duty, or “AJD” in Spanish parlance, rather than in annual property tax payments like in the U.S.”The stamp duty can run from 1% to 2.5%, and then there is [value-added tax] on new construction or transfer tax on pre-owned homes,” said certified financial planner Jude Boudreaux, partner and senior financial planner with The Planning Center in New Orleans. “It’s all substantially more than in the States.”

It must be paid by the buyer at the treasury office of the appropriate autonomous region in Spain within 30 business days after the property is bought.
“You pay a lot of the taxes upfront rather than on an ongoing basis, so the purchasing costs and the purchasing process are a lot different,” said Ingrim, who advises interested buyers to get in touch with local estate agents and property lawyers early on in the process.

If you are looking to retire in Spain, consider the financial and tax implications, and seek help from an advisor before setting into the idea, he added.
Additionally, make sure your taxes are in order. Although you are rarely taxed on the same income twice, look at the different streams of income and assets you may have in order to understand “who gets to tax what first, whether Spain or the U.S.,” said Ingrim.For instance, an American citizen working in Spain will have a higher tax rate, but those taxes become a deduction when they file their federal tax return in the U.S., said Boudreaux, who is a member of CNBC’s Financial Advisor Council.
On the other hand, the U.S. taxes your global income, so if an American earns an income from rental properties in Spain, or anywhere else in the world, “the U.S. will gladly tax your income from Spain,” he added.
For his part, Ingrim noted that “while you might have a liability to both systems, you rarely pay tax on the same income stream or asset base twice.”

Liabilities in the U.S. don’t just go away

It’s important to remember your debts in the U.S. doesn’t just go away when you move abroad, he added. “You need to still have a plan to deal with your American liabilities while you’re living abroad.”
Some countries, like Portugal, may ask foreign residents for a credit report from their home country when they take out a mortgage or try to establish credit. Keep your debts in mind and plan to keep up with your payments.
“Keep repaying your student loans, your car payments, mortgages, whatever it may be, and try to [keep up] your U.S. credit history because it may impact your going forward in your new country [of residence],” said Ingrim.
Keep an American bank account tied to a U.S. address open before you move so you can pay your bills through automatic transfers from that account, said Boudreaux, to save on exchange rates and monthly wires.Additionally, you may need a Spanish bank account to pay your daily living expenses in euros and avoid being regularly at the mercy of fluctuating exchange rates. The U.S. government imposes bank reporting rules on every bank that does business with U.S. citizens. Find a Spanish bank that complies with these rules, “so they can do all the proper reporting when and as necessary,” added Boudreaux.

You may qualify for different kinds of visas

Spain launched its digital nomad visa earlier this year, making it easier for foreigners to move to and work there. The visa is tailored for “international teleworkers,” and applicants must comply with a set of requirements, such as accreditation or professional experience of at least three years.
“Prior to having this visa, it was difficult to work in Spain because the tax rates were so high and there wasn’t a clear-cut immigration regime, other than the ‘golden visa’ that allowed you to move to Spain and work,” said Ingrim.The golden visa, which you only obtain if you purchase a property for more than 500,000 euros — or about $550,000 — allows you to live, work and earn a larger set of rights once you’re residing in Spain, he said.
Nonlucrative visas, meanwhile, are meant for people who are no longer employed, including retirees, who can rely on a passive income. This type of visa allows you to live in a new country but prohibit you from working. “The first step would be engaging with a Spanish immigration lawyer and understanding if you meet the requirements,” said Ingrim.
However, before you make your bid on a property, consider renting first to see if the area meets your preferences and needs, added Ingrim.
Some Americans already living in other countries, namely Portugal, are conscious about how arrangements like the golden visa can exacerbate housing problems for locals. That ought to be a consideration for buyers in Spain, he said.
In Ingrim’s experience, incoming U.S. buyers express concerns around the issue, saying “We don’t want any part in contributing to that.” As a result, many prefer to initially rent, as a precaution. More