Top 5 Tax Myths of Homeownership That Could Cost You

 

Owning a home tops the dream list for most Americans, and for plenty of good reasons. It’s a shelter for your family, a gathering place for your friends and a good long-term investment.

Tax breaks are also frequently cited as motivation for moving from renting to owning, and there are many ways a home can cut your tax bill.

But, as is often the case with the U.S. tax code, homeownership tax benefits are not always clear-cut. That frequently leads to some bad information floating around.

While myths, half-truths and misconceptions may abound, Bankrate.com has narrowed it down to five that, if you buy into them, could cost you.

1. My mortgage interest will reduce my tax bill.
This is true for the majority of homeowners, but not for all. And this tax break won’t work forever.

To take tax advantage of your home loan’s interest, you must itemize and come up with a total that exceeds your standard amount. On 2007 tax returns, the standard deductions are $5,350 for single taxpayers, $7,850 for head of household filers and $10,700 for married couples who file jointly. These amounts increase a bit each year to account for inflation.

“Given home prices these days, most owners are itemizing,” says Mark Luscombe, principal tax analyst with CCH of Riverwoods, Ill. By the time they count mortgage interest, property taxes and other nonhome deductions, such as state taxes and charitable gifts, their itemized totals easily surpass their allowable standard deductions.

But most is not all.

Taxpayers who buy a home late in the year, for instance, might find the standard deduction is more beneficial, at least initially, says Kathy Tollaksen, a CPA at Sikich in Aurora, Ill. In these cases, where you make only a few payments in a tax year, depending on your loan you might not pay much interest, at least not enough to exceed standard amounts.

Timing also could reduce or eliminate other home-related tax breaks.

“Quite a few states have real-estate taxes that are calculated in arrears. That is, they have already been paid or mostly paid (by the seller) by the time you buy,” says Tollaksen. “In the first year, you’re seeing taxes that are someone else’s responsibility so you’re not getting the full tax value of your real-estate taxes.”

The benefit of mortgage interest also could be a myth if you’ve lived in your home for a long time. In this case, you likely are paying more toward your loan’s principal instead of interest. So homeowners at the end of a loan term don’t get much, if any, from this tax break.

Or, as Bob D. Scharin, senior tax analyst and editor of Warren, Gorham & Lamont/RIA’s monthly tax journal “Practical Tax Strategies,” puts it, “Every deductible expense you incur may not produce a deduction.”

2. All costs related to my home are deductible.
There are no two ways about this one. It’s flat-out false.

“Some buyers think, hope, they can write off everything connected with the house,” says Tollaksen. “Not so. Association fees and property-insurance costs are not deductible.”

Neither, in most cases, is private mortgage insurance, which your lender probably required if your down payment was less than 20%. However, a new law changes the deductibility of PMI for mortgages originated or refinanced between Jan. 1, 2007, and Dec. 31, 2009.

If you got your mortgage and policy in that time frame, you might be able to deduct your insurance-premium payments. The law also extends beyond private insurance to others, including FHA, VA and rural housing.

There are some limits, though. The PMI deduction is phased out for taxpayers with adjusted gross incomes exceeding $100,000 and is totally eliminated once adjusted gross income reaches $110,000.

Don’t try to deduct basic maintenance, repair or home-improvement costs either.

Tollaksen says, “I’ve had people say, ‘I put a new roof on my home; can I deduct that?’ No.”

If you try to write off these expenses, expect to hear from the Internal Revenue Service and to pay a higher tax bill (and possible penalties and interest) after you refigure your taxes without the disallowed deductions.

However, you still need to keep track of these expenses.

“If you convert the home to rental property or sell it,” she says, “these costs will affect the property’s tax basis.”

A home’s basis is critical when it comes time to sell. And selling is also a tax area in which many people fall for myth No. 3.

3. I must use money from my home sale to buy another residence.
This used to be the only way to get around a tax bill on a home sale. Even then, you were only able to defer taxes by purchasing a new residence of equal or greater value with the profits from your other house. When you sold your final house, you’d owe those long-deferred taxes you had rolled over throughout the years. Home sellers age 55 or older were allowed a once-in-a-lifetime tax exemption of up to $125,000 in sale profit.

But on May 7, 1997, home-sale tax law changed. Still, a decade later, many homeowners are confused about the tax implications of selling.

“I recently heard some neighbors talking about having to buy another house when they sell to avoid the taxes,” says Scharin. “If the last time you sold the house was before 1997, you’re thinking of those old rules.”

Don’t worry. Most taxpayers still get a nice break. Now, if you live in the house for two of the five years before you sell, the IRS won’t collect tax on sale profit of up to $250,000 if you’re single or $500,000 if you and your spouse file a joint return.

“The law change has really affected people’s behavior,” says Luscombe. “Before, it didn’t really matter much whether you sold frequently or held onto your home for a long term. You basically could roll over the gain into a larger home and people could avoid tax until they sold for the final time without putting it into a replacement home.

“Now the law rewards people who sell frequently. In this current market, people who sell every couple of years can get and keep their gain,” Luscombe says. “But people who buy and hold might find they have reached the point where the gain exceeds the exclusion.”

That means they face unexpectedly high tax bills, even at the lower 15% capital-gains rate. The profit could also push them into a higher overall tax bracket, meaning they would make too much to claim some deductions, credits or exemptions. They also might even end up owing alternative minimum tax.

Another problematic consequence, says Luscombe, is that when the new rules took effect, people basically quit keeping records related to their homes.

“They thought: Since we’re never going to be taxed on the sale, there’s no need to keep track of what we paid and what improvements we made,” he says. The improvements add to your home’s basis, which you subtract from the sale price to determine your profit and whether any of it is taxable.

“Now with inflation in the housing market, a lot of people are selling homes in excess of the gains without any way to show that their tax bill should be less,” says Luscombe.

4. Putting my child on my home’s title is a smart tax move.
Worries about taxes on a residence sometimes lead homeowners to fall for this myth. It’s a particularly tricky one, because it combines confusion about residential taxes with the even more complex estate-tax area.

“Sometimes we’ll hear about taxpayers who, in doing some quick back-of-the-envelope estate planning, decide to put their home in the children’s names,” says Tollaksen. “The thinking is: My son or daughter won’t have to worry about this when I die.”

The goals: Avoid probate, keep the home in the family and get the property out of the parent’s estate for those tax purposes. Such a move, however, could produce other tax problems for your children.

Unless the child moves into the newly deeded house with the parent and lives there long enough (two of the previous five years) to make the house the child’s main residence, too, says Tollaksen, the son or daughter won’t get the $250,000 or $500,000 residential tax break when the child later decides to sell. Without establishing primary residency in the house, either before or after the parent passes away, the child’s ownership is viewed as an investment property.

Other parents opt to simply add a child’s name along with theirs on the title to the house, known legally as a joint tenancy. It doesn’t mean that all the owners live in the home, but simply that two or more people hold title to the property.

This, too, can produce tax complications.

Generally, when someone inherits a property, its value is stepped up. That means when the owner dies, the property becomes worth its fair market value that day.

But if the child co-owns the property with his parent, the child doesn’t get to fully use stepped-up basis. Tax law considers the addition of the child’s name to the title as a gift. And, along with that half of the home, the child receives half the basis that his or her parent has in the property.

This is known as the property’s carry-over basis. And it could be costly.

Consider, for example, that you bought your house many years ago and your basis in the property is $50,000. You add your daughter to the title. When you die, she inherits your half of the home, which by then is worth $250,000. A buyer offers $300,000 for the home.

Pretty good deal, right? From a real-estate perspective, yes. But not when it comes to your daughter’s tax bill on the sale.

Rather than owing taxes on just $50,000 more than the house’s stepped-up market value, your daughter will owe on three times that amount. Here’s the math:

Parent owns home with a basis of:	$50,000
Parent adds child to title, “giving” child carry-over basis of:	$25,000
At parent’s death, house is worth $250,000, producing on the inherited half a stepped-up basis of:	$125,000
Home subsequently sells for:	$300,000
Child’s total adjusted basis (line 2 plus line 3) is:	$150,000
Taxes due on sale profit (line 4 sale price less line 5 basis) of:	$150,000

What had been done with the best parental intention turned out to carry a big price because of this homeownership tax myth.

5. If I take a capital loss when I sell my home, I can write it off.
This myth, like No. 2, was probably started by wishful homeowners. Sorry, it’s just as wrong.

It is true that real estate, like any other asset, has the potential to go down as well as up in value. But unlike most of those other holdings, you cannot write off any loss you suffer if you must sell your main residence for less than what you paid.

That’s because your residence, under tax law, is considered personal property.

“When you sell your home for a loss, it’s not like other capital items,” says Scharin. “You don’t get to deduct personal property that you sell for a loss.”

“It’s the same as any personal property that declines in value,” says Luscombe, “like that old TV you sold to the neighbor kid so he could take it to college. You sold it for much less than you paid, but you can’t take a loss.”

You do, however, have to pay tax on gains you make when selling personal property.

But at least you now know the difference between fact and fiction when it comes to your residential property, which will help you make appropriate real-estate and tax decisions in the future. Full Story

 

From Money to Marraige: 8 Stress-Saving Tips for Enlisting an Architect

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t takes flexibility, communication and realistic expectations to work successfully with an architect. Here’s a round-up (by MSN Real Estate) of some tips from architects and homeowners.

Pay attention to personality. Most people hire an architect only once in their lives. Searching for one is akin to finding a financial planner, architects say. Look for an architect who has designed projects that are similar in style and scope to yours. “There’s no substitute for experience,” says Todd Strickland, a partner with Historical Concepts, an Atlanta architectural firm. Because designing a home is such a personal project, it’s important that you feel able to communicate with your architect.

Liza Nugent, 41, and her husband needed an architect to combine their apartment on Manhattan’s Upper East Side with a neighboring unit; they got referrals from friends. The first architect they called made a snippy remark about how “unsophisticated” co-op boards in buildings on side streets such as theirs make renovations difficult. “I thought, with that kind of attitude, we definitely wouldn’t get along,” Nugent says. After calling two more architects and interviewing three others, the Nugents picked a longtime acquaintance who had creative design solutions for their project.

Enlist an architect early. Most architects will do their best to design a structure to work with whatever plot of land you have to build on. But they also can help scout prospective land purchases. With a general vision of your house and a budget in mind, the architect can evaluate the pros and cons of a location that a client might overlook, such as whether a site is big enough to accommodate the dwelling or whether a neighbor’s right to a view will preclude building the 12-foot ceilings you want.

Is the site free of utility constraints? What about topographical features that could increase the cost of building? Paying for four or five hours of evaluation is likely to save money in the long run.

Bring visuals. Pictures help an architect understand your vision, whether it’s a rough sketch you’ve made, magazine photos of homes you like, or a coffee-table book featuring interiors by your favorite designer. Snapshots of specific lighting fixtures or cabinet styles are helpful, but so are pictures that convey intangibles: the sense of place created by sunlight streaming through a skylight, or a library room with a “warm” feeling.

Dallas architect Marc McCollom, who designs modern houses, says clients also should bring pictures of things they don’t like. Architects will regard the client’s visual portfolio as a cue for whether they’ll make a good team. “If they show me pictures with crown molding and decorative wallpaper, I shouldn’t take that job,” McCollom says. “I’m not going to be happy, and we shouldn’t work together.”

Find a listener. A relationship with a designer is like a marriage: Go with someone who listens, cut your losses with someone who doesn’t — or risk getting a house you don’t want to live in. When Jim Jenkins began a $1.5 million renovation of his Alamo, Calif., home, he hired a local who had designed other houses in the neighborhood. But 18 months into the process, the architect still hadn’t produced a design that the Jenkinses liked or that could get past the local homeowners association.

“He wouldn’t design what we were looking for,” Jenkins says. “My wife’s looking for something Caribbean and he kept thinking California Ranch.”

Jenkins pulled the plug on that designer and hired a Berkeley architect, Robert Nebolon. “He read the codes, had some creative ideas and within six months I got what I was looking for,” Jenkins says.

Clients need to listen, too. Telephones, faxes and e-mail aren’t the best ways to communicate about home design. Avoiding in-person meetings will delay construction. A good architect won’t act on any part of a project without clear approval.

Talk money upfront. A flat fee may be appropriate for projects whose scope is very defined. But construction projects often include unforeseen challenges, and for that reason most architects prefer to charge by the hour or by a percentage of building costs. Some architects charge by the hour in the concept stage and then charge fees ranging from 8% to 18% of construction costs after hiring. For projects costing $1.5 million plus, expect fees to range from 12% to 18%, says James P. Cramer, chairman of Greenway Group, a design-industry consulting firm.

Some architects ask clients for a wish list of features, fixtures and qualities along with an estimated budget. “Sometimes people’s expectations aren’t realistic, given what their budgets are,” says Manhattan architect Darby Curtis.

Consider full service. Architects will be as involved as you want them to be. They can simply do design conception and deliver drawings. Or they can visit sites, coordinate contractors and observe construction. Many architects advise clients to retain a designer through construction. “In the long run you’ll save yourself from headaches and extra construction,” Curtis says.

Have a strong marriage. Architects offer this last bit of advice in all seriousness. Money tends to cause stress in a relationship, and building a home involves a lot of money. Building a house together, McCollom says, “is not going to save your marriage.” Full Story

 

Too Many Cast-Off Toys Cluttering Your Casa? Rental Options to the Rescue

 

Every parent of young children has an unwanted-toy graveyard somewhere in the home. Today’s prized playthings inevitably become tomorrow’s cast-offs, ready to be given away, discarded or boxed up in the garage. According to the folks at Springwise however, the alternative, offered by Texas start-up Babyplays, is to receive four to six toys by mail each month. Parents can keep the toys as long as they like, and send them back to receive a fresh batch. Monthly subscription rates range from $36.99 to $64.99.

Babyplays offers a range of age-appropriate toys, and depending on their membership level, parents can rent up to 10 toys a month. Besides reducing clutter, members can save money by renting instead of owning. You could call it the Netflix rental model applied to toys. We’ve seen start-ups tweak the rent-not-buy concept in innovative ways: a German company, Lütte-Leihen, sends parents a fresh batch of baby clothes that can be exchanged for new ones each month and the same model has been applied to women’s accessories, with companies like Bag, Borrow or Steal offering members access to designer handbags and jewellery.

A factor all of these firms must reckon with is the need to acquire an adequate inventory of items to accommodate customer whims—a potentially expensive proposition. That said, the rental model still has plenty of new potential applications. What’s key is that many consumers are becoming less interested in full ownership, opting instead for the convenience and flexibility of renting or fractional ownership.

 

Consumer Confidence: High Hopes or Hardly Holding On?

According to the Center for Media Research and the BIGresearch Consumer Intentions & Actions Survey in February, over 8,000 consumers provided unique insights & identified opportunities in a fragmented and transitory marketplace. On the downside, only one in four (26.2%) are confident/very confident in chances for a strong economy in February, a five year low. A sinking housing market, credit collapse, and record prices at the pump provides the impetus for only half as many consumers holding high hopes for the future than in February 2007.

Consumers Anticipating a Strong Economy
Date	% of Respondents
February 2003	30.8
February 2004	49.3
February 2005	47.7
February 2006	44.5
February 2007	53.2
February 2008	26.2
Source: BIGresearch, February 2008

On the upside, Phil Rist, Vice President of Strategy for BIGresearch, concludes that “Many Americans will be wisely using their rebate checks to save, spend, and pay down debt, so the overall result will be positive for the U.S. economy… some will splurge on big ticket items, many… will use the checks for important day-to-day purchases.”

While women will spend a larger percentage of their rebate check than men (42.2% vs. 38.7%), both genders will plan to set aside the same percentage for savings (18.7%) Young adults 18-24 will spend more of their checks (46.2%) than any other age group. And:

• 30.3% contend they’ll save the money in their piggy banks
• 25.4% will use it to pay down credit cards, while
• 15.7% say they’ll pay down debt (installment loans)
• 14.6% reveal that they’d purchase necessities with their checks, with 22.5% of those earning under $50,000 buying necessities 

And while 39.7% of those aged 18-24 are the most likely group to save their checks, 14.9% of this age bracket is the most likely to use their checks toward paying off student loans. 13.3% will buy apparel, and 11.2% expect to purchase electronics.

While confidence in the economy is plummeting, only two in five contend that they’ve become more practical in their purchases, down a point from January, and still on the rise from ‘07.

50.4% of the respondents contend there will be “more” layoffs in the next six months, up from 41.5% in January and the highest reading since March ‘03 (50.4%). While consumers foresee a dreary outlook for employment, it seems they have the “it’s not going to be me. 5.5% fear becoming laid off, up slightly from January’s 5.2%.

With pump prices rising to today’s average $2.972/gal (source: AAA), driver’s budgets are increasingly strained by additional fuel expenditures.  While 40.5% are attempting to cope by simply driving less, 35.3% say pump pressures have led them to reduce dining out and 33.6% decreasing vacation/travel/ 29.8% are spending less on clothing. while 22.4% are delaying a major purchase, such as a car or furniture

Seasonal demand for spring merchandise, such as Easter apparel and lawn & garden supplies, lifts the 90 Day Outlook from January, according to the BIGresearch Diffusion Index, but the current economic outlook is expected to put a damper on spending compared to February 2007.

Consumers aren’t as likely to be considering purchasing high-dollar durables in the next six months compared to last month and last year. Purchase intentions are down for computers, furniture, home appliances, housing, jewelry, DVD/VCR, and digital cameras…major home improvements and vacation travel flat from January (though still down from ‘07), while TV remains flat from last month and rises from last year.

Six month purchase intentions for autos remain stable from last month at 11.8%. Among those planning to buy, 43.5% still plan to buy new, while 16.7% aren’t yet sure. The average price auto buyers are planning to spend has lowered from $21,150 in January to $19,830 this month.

For more from BIGresearch, please visit them here.

 

“Greening” Your Real Estate Office

Whether you have your own office or are part of a larger office environment, you can make some dramatic changes for your pocket book and the environment quickly and easily. Here are some ideas from RISMedia to get you started.

- Use both sides of writing paper. Copy documents on both sides as well. This reduces paper costs enormously and saves a considerable amount of wasted paper.

Statistics: It is estimated you can save 20% on paper by everyone following these simple rules. This can save $70 per employee, per year or $7000 in just a 100 employee office! An employee in a typical business generates 1.5 pounds of waste paper per day, most of which is NOT recycled.

- Paperless payroll can create a large savings as well. Asking receivers of your e-mails and documents to only print them out if it is absolutely necessary. Create a common statement that is at the bottom of all your e-mail communications.

- Buy office supplies that disintegrate in landfills. Avoid aluminum, PVC, and styrofoam.

- Buy recycled paper that is PCF (processed chlorine free). Use unbleached or uncolored paper. If you need to use colored paper, use pastels. Buy products in bulk to minimize packaging.

Statistics: A ton of 100% recycled paper saves the equivalent of 4,100 kWh of energy, 7,000 gallons of water, 60 pounds of air emissions and three cubic yards of landfill space. In the U.S., 40% of solid waste is paper!

- Change light fixtures to compact fluorescent lamps. Replace old fluorescent lighting fixtures that are likely using T-12 lamps with T-8 fluorescent lamps. You’ll get better color, less flickering and use 20% less energy.

- Use occupancy sensors in conference, break and bathrooms. They are easy to install and relatively inexpensive.

Statistics: Changing to more efficient lamps can achieve 50-80% savings, and they last 10X longer. Lighting is generally 29% of the energy use in an office.

- Need new heating and cooling equipment? Opt for the highest energy efficiency equipment possible. Go to the ENERGY STAR Website for information. Turn your thermostats down by one or two degrees and save about 10% on your electricity bill!

Statistics: Heating and cooling office space is responsible for 40% of carbon dioxide emissions in the U.S. and it eats more than 70% of electricity usage.

- If you are searching for office space, look for green certified buildings. Contact the Leadership in Energy and Environmental Design (LEED) and the US Green Building Council to start.

Tax Savings: Building owners and tenants who can reduce energy costs by 50% or more can get a tax deduction. Go to the government’s ENERGY STAR Website for more information. Many local utility companies are now offering energy audits for free. Contact your local utility and get started.

- Use power strips for all equipment that can be turned off at night in your home, as well as your offices.

Statistic: 40 watts of energy can be lost for each piece of equipment remaining plugged in, but not in use.

- Upgrade older computer equipment by adding memory capability or RAM and make repairs.

Always purchase new energy efficient equipment if you must replace it, and make sure it has expandable memory slots. For computers the Green Electronics Council’s Electronic Product Environmental Assessment Tool can help.

- Place equipment into sleep modes automatically – screensavers do not count – they actually waste more energy.

- Always recycle older equipment & cartridges with the manufacturer or at recycling drives in your community. Never just throw away cartridges or equipment in the garbage.

- Recycle cell phones and rechargeable batteries at sites such as www.call2recycle.com

Statistics: Office equipment typically uses about 16% of energy costs. If every US computer and monitor were turned off at night, the nation could shut down eight large power stations and avoid emitting 7 million tons of CO2 every year. And the energy savings in just your own office will add up to real dollars!

- Have a recycling program for paper, glass, plastic at your office. Many times recycling bins are provided free of charge. Search the Internet or phone book for your city’s program and get started. Make sure everyone knows where the recycling bins are and what you expect.

- Reward employees for good energy conservation and recycling behavior. You can even give incentives for ride sharing, bicycling and walking to work, paper savings, energy savings and more. Communicate what they have saved in money, energy and materials. Create office Green Guidelines.

- You will find many ways around the office to eliminate landfill waste and conserve energy if you look. Even smaller items like eliminating styrofoam coffee cups, plastic forks, knives and spoons. The kitchen is a great area to review. And, again, it will save money too!

- If you are too busy and have a large office or numerous offices, consider hiring an energy manager/transportation coordinator. This person can pay for himself in a very short time and preserve the environment for future generations. Full Story

 

More Green Living: 10 Easy Tips for “Greening” Your Home

 

When it comes to the environment, being a good global citizen starts at your doorstep. From recycling to using alternative cleaning materials, minor changes at home can add up to real benefits for the planet, not to mention your own health and happiness.

It may be a cliché, but the best way to be Earth-friendly is to cut down on what you consume and recycle whenever you can. The U.S. generates about 208 million tons of municipal solid waste a year, according to the National Institutes of Health. That’s more than 4 pounds per person per day. Every little bit helps; recycling just one glass bottle saves enough electricity to light a 100-watt bulb for four hours.

Here are 10 more easy ways from MSN.com to green your home:

1. Green up your appliances. Getting rid of that old refrigerator in the garage could save you as much as $150 a year, according to the Environmental Protection Agency. Appliance use comprises about 18% of a typical home’s total energy bill, with the fridge being one of the biggest energy hogs. If any of your appliances is more than 10 years old, the EPA suggests replacing them with energy-efficient models that bear their “Energy Star” logo. Energy Star-qualified appliances use 10%-50% less energy and water than standard models. According to the Energy Star site, if just one in 10 homes used energy-efficient appliances, it would be equivalent to planting 1.7 million new acres of trees.

Also, consider what you put in that energy-efficient refrigerator. Pesticides, transportation and packaging are all things to consider when stocking up. Buying local cuts down on the fossil fuels burned to get the food to you while organic foods are produced without potentially harmful pesticides and fertilizers.

2. Watch the temp. Almost half a home’s energy consumption is due to heating and cooling. 

• Turn down the thermostat in cold weather and keep it higher in warm weather. Each degree below 68°F (20°C) during colder weather saves 3%-5% more heating energy, while keeping your thermostat at 78°F in warmer weather will save you energy and money. A programmable thermostat will make these temperature changes for you automatically.
• Clean your furnace’s air filter monthly during heavy usage.
• Consider a new furnace. Today’s furnaces are about 25% more efficient than they were in the 1980s. (And don’t forget to check out furnaces carrying the Energy Star label.)
• To keep your cool in warmer weather, shade your east and west windows and delay heat-generating activities such as dishwashing until evening.
• Use ceiling fans instead of air conditioners. Light clothing in summer is typically comfortable between 72°F and 78°F. But moving air feels cooler, so a slow-moving fan easily can extend the comfort range to 82°F, according to “Consumer Guide to Home Energy Savings” by Alex Wilson.

3. Save water. The Web site “Water — Use it Wisely,” created by a group of Arizona cities, lists 100 simple ways to save water. We’ll share just a few here:

• Put an aerator on all household faucets and cut your annual water consumption by 50%. 
• Install a low-flow toilet. They use only 1.6 gallons per flush, compared to 3.5 gallons per flush for pre-1994 models. If you have an older model, adjust your float valve to admit less water into the toilet’s tank. 

Of course, you don’t need products to save water — behavioral changes also add up quickly: using a broom instead of the garden hose to clean your driveway can save 80 gallons of water and turning the water off when you brush your teeth will save 4.5 gallons each time.

4. Clean green. Stop buying household cleaners that are potentially toxic to both you and the environment. In his book, “The Safe Shopper’s Bible,” David Steinman suggests reading labels for specific, eco-friendly ingredients that also perform effectively. These include grain alcohol instead of toxic butyl cellosolve, commonly found in carpet cleaner and some window cleaners as a solvent; coconut or other plant oils rather than petroleum in detergents; and plant-oil disinfectants such as eucalyptus, rosemary or sage rather than triclosan, an antifungal agent found in soaps and deodorant. Or, skip buying altogether and make your own cleaning products. Use simple ingredients such as plain soap, water, baking soda (sodium bicarbonate), vinegar, washing soda (sodium carbonate), lemon juice and borax and save money at the same time. Check out these books by Annie Bertold-Bond for cleaning recipes: “Clean and Green” and “Better Basics for the Home.”

5. Let there be energy-efficient light. Compact Fluorescent Light bulbs (CFLs) use 66% less energy than a standard incandescent bulb and last up to 10 times longer. Replacing a 100-watt incandescent bulb with a 32-watt CFL can save $30 in energy costs over the life of the bulb.

6. Save a tree, use less paper.  You can buy “tree-free” 100% post-consumer recycled paper for everything from greeting cards to toilet paper. Paper with a high post-consumer waste content uses less virgin pulp and keeps more waste paper out of landfills.

Other tips:

• Remove yourself from junk mail lists. Each person will receive almost 560 pieces of junk mail this year, which adds up nationally to 4.5 million tons, according to the Native Forest Network. About 44% of all junk mail is thrown in the trash, unopened and unread, and ends up in a landfill. To stem the flow into your own home, contact the Direct Marketing Association’s Mail Preference Service at P.O. Box 643, Carmel, NY 10512, or download the online form. Opt out of credit card or insurance offers at OptOutPrescreen.com or by calling 888-567-8688, a single automated phone line maintained by the major credit bureaus.
• Buy unbleached paper. Many paper products, including some made from recycled fibers, are bleached with chlorine. The bleaching process can create harmful byproducts, including dioxins, which accumulate in our air, water and soil over time.

Finally, here’s a third answer to the old “paper or plastic” question: No thanks. Carry your own cloth bags to the store to avoid using store bags.

7. Want hardwood floors? Opt for bamboo. Bamboo is considered an environmentally friendly flooring material due to its high yield and the relatively fast rate at which it replenishes itself. It takes just four to six years for bamboo to mature, compared to 50-100 years for typical hardwoods. Just be sure to look for sources that use formaldehyde-free glues.

8. Reduce plastics, reduce global warming. Each year, Americans throw away some 100 billion polyethylene plastic bags — from grocery and trash bags to those ultra-convenient sandwich bags. Unfortunately, plastics are made from petroleum — the processing and burning of which is considered one of the main contributors to global warming, according to the EPA. In addition, sending plastics to the landfill also increases greenhouse gases. Reduce, re-use and recycle your plastics for one of the best ways to combat global warming.

9. Use healthier paint. Conventional paints contain solvents, toxic metals and volatile organic compounds (VOCs) that can cause smog, ozone pollution and indoor air quality problems with negative health effects, according to the EPA. These unhealthy ingredients are released into the air while you’re painting, while the paint dries and even after the paints are completely dry. Opt instead for zero- or low-VOC paint, made by most major paint manufacturers today.

10. Garden green. First, use compost instead of synthetic fertilizers. Compost provides a full complement of soil organisms and the balance of nutrients needed to maintain the soil’s well-being without the chemicals of synthetic fertilizers. And healthy soil minimizes weeds and is key to producing healthy plants, which in turn can prevent many pest problems from developing to begin with.

• Use native plants as much as possible. Native plants have adapted over time to the local environment and support native animals. They also use less water and require less of your attention.
• Focus on perennials. Gardening with plants that live for more than one year means you don’t have to pay for new plants every year; it also saves the resources used commercially to grow annuals.
• Stop using chemical pesticides. American households use 80 million pounds of pesticides each year, according to the EPA. These toxic chemicals escape gardens and concentrate in the environment, posing threats to animals and people, especially children. A better alternative is to try a variety of organic and physical pest control methods, such as using diatomaceous earth to kill insects, pouring boiling water on weeds or using beer to bait slugs. You can find more non-chemical pest control tips at the National Audubon Society’s site.

Finally, consider using an old-fashioned push mower. The only energy expended is yours. Full Story

 

Will Paying Your Mortgage Off Early Payoff for You?

 

Does it ever make sense for a homeowner to pay off a mortgage early?

According to Kiplinger.com, the answer depends on the interest rate of the loan and the timing of the payoff.

Paying down a 6% mortgage is the equivalent of earning a 6% taxable return on your money. You should be able to beat that return by investing your money elsewhere, especially when investing for the long term.

“If you have a very low interest rate on your loan and know that you can earn a higher return with additional money you have to invest, it’s OK to keep the mortgage,” says Los Angeles CPA Michael Eisenberg.

Investing outside your mortgage also gives you easier access to your funds because you don’t have to borrow against your home equity to get your money. Paying more toward your mortgage can reduce the total interest paid, and you might pay off your loan earlier. But it doesn’t lower your payments, and if you’re still in the early years of the loan, you might not see the difference for a decade or more.

Your priorities may be different, however, if you’re nearing retirement and your mortgage is close to being paid off. In that case, making extra payments can speed up the payoff, lowering your expenses after you leave your job. In Eisenberg’s experience, “most people don’t want to have debt when they retire.”

Paying off the mortgage early made sense for Myrna Oliver, 64, who worked at the Los Angeles Times for more than 30 years. When Oliver was in her mid-50s, many of her colleagues were getting buyout offers. She wasn’t ready to retire yet, but she wanted to be able to jump at a good offer if one came her way. To do that, she needed to cut her post-retirement expenses — especially the mortgage on her condo in downtown Los Angeles.

“I didn’t want the mortgage payments to figure into my retirement spending,” says Oliver.

So Oliver began making extra payments toward her 7.5% loan whenever she got a raise, a bonus or extra money from some other source. At age 60, she paid off the loan — eight years early — and shifted the money to her 401(k) plan to take advantage of catch-up provisions for contributors who are 50 or older. This year, employees in that age range can kick in an extra $5,000, on top of the $15,500 that all workers may contribute.

When Oliver got a buyout offer last year, she had only three weeks to make a decision, but it was a no-brainer.

“Having the mortgage paid off gave me the freedom to take early retirement,” she says — and to take a year off to travel. Full Story

 

Hollywood Hits the Market

 

Looking for a commanding view of the collapsing housing market? According to a recent article in the Wall Street Journal, some 138 mountaintop acres next to the landmark Hollywood sign in Los Angeles are going on sale Wednesday for $22 million.

Abutting the largest urban park in the country –- and just west of the giant sign’s H, the property atop Cahuenga Peak has been privately owned for years. Eccentric billionaire Howard Hughes bought it before World War II in hopes of building a mountain hideaway for his then-girlfriend Ginger Rogers. She demurred. It passed undeveloped into Mr. Hughes’s estate and was sold in 2002 to Chicago-based Fox River Co. for $1.68 million.

Two years ago, city officials, residents and conservationists launched a fundraising drive to buy the property atop the 1,820-foot-high peak, which affords sweeping views of Los Angeles and the San Fernando Valley and the San Gabriel mountains. Their stated goal was to make the peak part of Griffith Park, the municipal land that practically envelopes it. Safe to say, they didn’t raise anywhere near the current $22 million asking price.

Griffith Park has suffered two damaging wildfires in the past year. Any potential developer is certain to face obstacles getting building permits.

Still, rare hill properties in Los Angeles can attract determined buyers, while the overall housing market remains depressed. In Los Angeles County, notices of default outnumbered home sales in the fourth quarter of 2007, and the median price of homes continues to fall, according to DataQuick Information Systems, a La Jolla, Calif., real-estate research firm. From the lofty heights of Cahuenga Peak, the view isn’t necessarily rosy. Full Story

 

New & Old Points: Two More Tax Deductions Often Missed

How many times have you done your taxes and, three weeks later, learned you had missed the opportunity for a deduction? Too many, I’m sure. How can you not miss these deductions the next time? Start planning now.

I’ve posted previously about What is Deductibe When Buying a Home, but here are two of the most often overlooked tax deductions for current homeowners that can affect your tax bill for 2007 and your tax planning for 2008.

New points on refinancing

With interest rates so low over the past few years — even in 2007 and 2008 — lots of homes have been refinanced, sometimes more than once.

Any points you pay to refinance your home can be deducted on a monthly basis over the life of the new loan. So, if you refinanced your mortgage on June 1, 2007, for a 20-year term, seven out of 240 months will have passed after Dec. 31. If you paid $2,400 in points, you can write off $70 ($10 a month for seven months) for 2007. You can write off $120 for 2007 and each year thereafter until the points have been deducted in full. The amount may not be huge, but every little bit helps.

Old points on refinancing

This is one deduction lots of people miss. All unamortized points on an old refinancing are deducted in the year of a new refinancing.

So, let’s say you refinanced on June 1, 2006, and paid $2,400 in points. You refinanced again on June 1, 2007. You can deduct all the remaining points on the 2006 loan. That’s $2,280 plus the $50 you could deduct for January through May 2007. Likewise, if you refinance the 2007 loan in 2008 (if interest rates stay low), you will be able to write off the remaining balance on your 2008 return. Full Story

 

Retirement & Relocation: Boomers’ Plans to Pursue Sun and Fun

 

According to a recent article by RISMedia, additional results from a new retirement study conducted by Gray Hair Management, one of leading career coaching, networking and job search resources for professionals with base salaries of $75,000 to $300,000+, reveal that 70% of America’s corporate executives plan to pursue hobbies, travel or golf during their retirement years, and half are planning a post-retirement relocation.

Gray Hair Management’s 2007 Executive Retirement Survey was conducted in December 2007 and included almost 1000 senior level executives age 40 or older. And according to the article, results related to retirement age, financial readiness and top retirement concerns were reported earlier this month, revealing that 75.2% of America’s corporate executives plan to retire after age 60 and only half believe they are on course, financially, to retire at their planned retirement age. Additionally, health care and finances top their list of retirement concerns.

Leisure Pursuits

Contrary to reports that most baby boomers plan to work or start businesses during retirement, Gray Hair Management found that the majority of corporate executives (70.4%) plan to pursue hobbies, travel or play golf in their retirement days. Specifically, 30.9% said they plan to pursue hobbies, 25.9% plan to travel and 13.6% plan to play golf. However, 9.1% plan to start a business, 5.7% plan to go back to school, 5.4% plan to do volunteer work and 3.8% plan to work part-time (primarily as teachers or consultants).

“As baby boomer executives postpone retirement until their late sixties, seventies and beyond, it appears that most plan to enjoy leisure pursuits, rather than work, in their post-retirement days,” said Scott Kane founder and managing director of Gray Hair Management. “For those who plan to work after retirement, they will pursue volunteer opportunities, entrepreneurial ventures or part-time work as teachers or consultants.”

Retirement Relocation

The Gray Hair Management retirement survey also found that 50.7% of corporate executives plan to relocate when they retire. Almost 40% (38.5%) cited climate is the biggest reason for their planned post-retirement move, while 23.5%% want a smaller home, 17.5% said they need to downsize financially and 13% want to move closer to family.

Of those who plan to relocate after retirement, 74.4% plan to move out of state, with 8.5% planning to move to Florida, 7.6% to Arizona, 2.7% to Texas and 54.1% to other states. Additionally, 12.4% plan to move within their existing city/area, while 5.6% plan to move out of the country.

For more information, visit www.grayhairmanagement.com. Full Story