The Latest Personal Finance News for December 2023

Mortgage Rates Tumble After Hitting 8%

In October, mortgage rates made a brief stop at 8%, the highest since 2000. Since then, they’ve dropped sharply, according to Mortgage News Daily. Reasons for the drop include a dip in the 10-year Treasury bond yield and a slumping housing market: Existing home sales in the U.S. have dropped to a 13-year low.

Why It Matters

Homebuyers have taken a beating in the past few years, with home prices increasing at a blistering pace, followed by 20-year-high mortgage rates. Many have been forced to delay their decision to buy, and those who could afford it are stuck with record-high mortgage payments.

If the inflation rate continues to cool and housing market demand remains low, mortgage rates may continue to come down to a more reasonable level, making homeownership more affordable for new homebuyers and creating refinance opportunities for existing homeowners.

What You Can Do

• Check the latest mortgage rates.
• Understand how rising interest rates affect mortgage costs.
• Learn how to deal with high mortgage rates.
• Consider whether to get an adjustable-rate mortgage.

Key Inflation Figure Hits a Two-Year Low

The core consumer price index (CPI), which excludes volatile food and energy prices, increased by 0.2% month over month and 4% year over year, according to the Bureau of Labor Statistics. The annual rate, a key inflation indicator, was the lowest it’s been since September 2021.

That rate remains higher than the 2% target rate for the Federal Reserve. But in the Federal Open Market Committee’s latest meeting, officials indicated that raising interest rates again is unlikely unless economic conditions worsen.

Why It Matters

The inflation rate continues to respond slowly to the Fed’s aggressive interest rate campaign, but economists and investors are optimistic. The S&P 500 rallied in November after a tumultuous October, and the consensus among top economists is that the economy is likely to dodge a recession, reaching nearly 2% inflation in 2024.

What You Can Do

• See how hard inflation is hitting your state compared to others.
• Read up on ways you can fight inflation.
• Understand how inflation impacts your holiday shopping.
• Learn about low-risk investments you can rely on when inflation is high.

IRS Delays a Controversial Business Tax Rule Again

In 2021, the American Rescue Plan (ARP) made a significant change to how business owners report payments received on platforms like PayPal, Venmo, Etsy and StubHub.

Currently, those platforms must report payments only if a business receives more than 200 transactions per year totaling more than $20,000. The ARP cut that threshold down to $600 with no transaction minimum.

Slated to be enforced for the 2022 tax year, the IRS announced a one-year delay in December 2022. Now, the tax agency has announced another delay to consider adjustments that could make implementation go more smoothly.

Why It Matters

The new tax provision doesn’t change what small business owners are required to pay in taxes. But both lobbyists and business owners have pointed out that it primarily targets small business owners and casual online sellers who may not have the resources to verify and dispute inaccurate reporting. Those who would be affected can contact their representatives to express their thoughts about the rule and lobby for a permanent change.

What You Can Do

• Learn more about income tax.
• Understand which documents you need to file your tax return.
• Read up on how to report online marketplace sales.
• Determine whether you qualify for business tax deductions.

2024 Tax Brackets and Standard Deduction Get a Huge Increase

The IRS has announced inflation adjustments for income tax brackets and the standard deduction for the 2024 tax year. The increase for both was 5.4%, according to a Wall Street Journal report, which is the second-largest hike in 30 years after the 7.1% increase last year.

Why It Matters

The standard deduction is an amount you can subtract from your taxable income unless you qualify for higher itemized deductions. Tax brackets, on the other hand, dictate how much tax you owe on portions of your taxable income, with each bracket assessing a higher marginal tax rate.

These adjustments won’t affect your 2023 tax return, but they could result in a lower tax bill on your 2024 return, especially if your income doesn’t change by much.

What You Can Do

• Learn about the difference between standard and itemized deductions.
• Understand how tax brackets work.
• Know the difference between marginal and effective tax rates.
• Read up on tips for increasing your tax refund.

Good Credit Can Contribute to a Healthy Financial Plan

While there are aspects of your financial situation that are outside of your control, building and maintaining a good credit score can help you weather challenges and save money in the long run.

With Experian’s free credit monitoring service, you’ll get access to your FICO Score and your Experian credit report. With this information in hand, you can gauge your credit health and target areas of your credit profile that you can improve over time. And with real-time alerts whenever your report is updated, you can spot potential issues and fraud and address them quickly.