What You Should Know About Your Home and Your 2013 Taxes By: Dona DeZube

Published: December 12, 2013

It’s the last year for three sweet home tax benefits, but the first for a way simpler home office deduction.



These days few things start a fight on Capitol Hill faster than taxes. Despite the fact that three important tax benefits used by millions of American homeowners are days from expiring, Congress is unlikely to do anything to re-up them any time soon.

So if you’re eligible, tax year 2013 is possibly the last time to claim the private mortgage insurance (PMI) deduction, the energy tax credit, and debt forgiveness benefit, all of which all expire on Dec. 31, 2013. 

At least there’s one piece of good news for homeowners: If you have a home office, there’s a new, simpler option for calculating the home office deduction for which you may qualify on your 2013 taxes.

Meanwhile, here’s what you need to know about those expiring benefits as you ready your taxes:

PMI Deduction

This tax rule lets you deduct the cost of private mortgage insurance, which is what you pay your lender each month if you put down less than 20% on a home. PMI protects the lender if you default on the home loan. Your deduction could amount to a couple hundred dollars depending on your tax bracket and other factors.

Find out if you qualify for and how to take the PMI deduction.

Energy-Efficiency Upgrades

This sweet little tax credit lets you offset what you owe the IRS dollar-for-dollar for up to 10% of the amount you spent on certain home energy-efficiency upgrades, from insulation to water heaters. On the downside, the credit is capped at $500 (less in some cases). But on the bright side, the right improvement could lower your utility bills indefinitely. 

Related: Take back your energy bills with these high-ROI energy-efficiency practices.

Debt Forgiveness

When you go through a short sale, foreclosure, or deed-in-lieu, your lender typically lets you off the hook for some or all of what you owe on your mortgage. 

That forgiven mortgage debt is income, on which you’d typically have to pay income tax. 

Suppose you’re in financial distress and your lender agrees to let you short-sell your home, say for $50,000 less than you owe on the mortgage, and forgive you for the balance. Without the protection of the Mortgage Debt Forgiveness Act, you’ll owe income tax on that $50,000. 

It’s likely if you had the money to pay income tax on $50,000, you’d have used it to pay your mortgage in the first place. 

New Simplified Option for the Home Office Deduction

This may be the last year for the benefits above, but a new one kicks in for the 2013 tax year. If you work from home, you may qualify to use a new, simplified option for claiming the home office deduction when you file your 2013 taxes.

How much simpler is it? It lets you claim $5 per sq. ft. for up to 300 sq. ft. instead of having to compute the actual expenses of your home office using a 43-line form. To calculate the square footage of your office, just multiply the length of two walls. For example, an 8-by-10-foot room is 80 sq. ft. And at $5 per, that’s $400.

Although using the simplified option is obviously easier, the basic requirements for claiming the home office deduction haven’t changed. Your home office still must be used for business purposes:

• Exclusively, and

• On a regular basis.

Related: Which Home Office Set-Ups Qualify for a Deduction?

Why Might the Tax Benefits Not Be Renewed?

Although the expiring tax benefits were renewed retroactively in past years, that may not happen in 2014 because many in Congress would like to see comprehensive tax reform rather than scattershot renewals of individual provisions. This could delay a decision on the homeownership tax benefits until the big picture budget and tax issues are resolved.

So if you can, enjoy them now!

7 Smart Strategies for Kitchen RemodelingBy: John Riha

Published: May 30, 2013

Follow these 7 strategies to get the most financial gain on your kitchen remodel.



And if done right, a kitchen remodel can recoup much of its cost. Kitchen remodels in the $50,000 to $60,000 range recoup about 69% of the initial project cost when the home is sold.

A minor kitchen remodel of about $18,500 does even better, returning more than 75% of your investment, according to the most recent Cost vs. Value data from Remodeling magazine.

To maximize your return on investment, follow these 7 strategies to keep you on budget and help you make smart choices.

1. Plan, Plan, Plan

Planning your kitchen remodel should take more time than the actual construction. If you plan well, the amount of time you’re inconvenienced by construction mayhem will be minimized. Plus, you’re more likely to stay on budget.

How much time should you spend planning? The National Kitchen and Bath Association recommends at least six months. That way, you won’t be tempted to change your mind during construction and create change orders, which will inflate construction costs and hurt your return on investment. 

Some tips on planning:

Study your existing kitchen: How wide is the doorway into your kitchen? It’s a common mistake many homeowners make: Buying the extra-large fridge only to find they can’t get it in the doorway. To avoid mistakes like this, create a drawing of your kitchen with measurements for doorways, walkways, counters, etc. And don’t forget height, too.

Think about traffic patterns: Work aisles should be a minimum of 42 inches wide and at least 48 inches wide for households with multiple cooks.

Design with ergonomics in mind: Drawers or pull-out shelves in base cabinets; counter heights that can adjust up or down; a wall oven instead of a range: These are all features that make a kitchen accessible to everyone — and a pleasure to work in.

Related: Test Your Ergonomic Design Knowledge

Plan for the unforeseeable: Even if you’ve planned down to the number of nails you’ll need in your remodel, expect the unexpected. Build in a little leeway for completing the remodel. Want it done by Thanksgiving? Then plan to be done before Halloween.

Choose all your fixtures and materials before starting: Contractors will be able to make more accurate bids, and you’ll lessen the risk of delays because of back orders.

Don’t be afraid to seek help: A professional designer can simplify your kitchen remodel. Pros help make style decisions, foresee potential problems, and schedule contractors. Expect fees around $50 to $150 per hour, or 5% to 15% of the total cost of the project.

More tips on planning a kitchen remodel:

Keep the same footprint
Get real about appliances
Don't underestimate the power of lighting
Be quality-conscious
Add storage, not space
Communicate clearly with your remodelers

2. Keep the Same FootprintNothing will drive up the cost of a remodel faster than changing the location of plumbing pipes and electrical outlets, and knocking down walls. This is usually where unforeseen problems occur.

So if possible, keep appliances, water fixtures, and walls in the same location. 

Not only will you save on demolition and reconstruction costs, you’ll cut the amount of dust and debris your project generates.

More tips on planning a kitchen remodel:

Plan, plan, plan
Get real about appliances
Don't underestimate the power of lighting
Be quality-conscious
Add storage, not space
Communicate clearly with your remodelers

3. Get Real About AppliancesIt’s easy to get carried away when planning your new kitchen. A six-burner commercial-grade range and luxury-brand refrigerator may make eye-catching centerpieces, but they may not fit your cooking needs or lifestyle.

Appliances are essentially tools used to cook and store food. Your kitchen remodel shouldn’t be about the tools, but the design and functionality of the entire kitchen.

So unless you’re an exceptional cook who cooks a lot, concentrate your dollars on long-term features that add value, such as cabinets and flooring. 

Then choose appliances made by trusted brands that have high marks in online reviews and Consumer Reports.

More tips on planning a kitchen remodel:

Plan, plan, plan
Keep the same footprint
Don't underestimate the power of lighting
Be quality-conscious
Add storage, not space
Communicate clearly with your remodelers

4. Don’t Underestimate the Power of LightingLighting can make a world of difference in a kitchen. It can make it look larger and brighter. And it will help you work safely and efficiently. You should have two different types of lighting in your kitchen:
 
Task Lighting: Under-cabinet lighting should be on your must-do list, since cabinets create such dark work areas. And since you’re remodeling, there won’t be a better time to hard-wire your lights. (Here’s more about under-cabinet lights.) Plan for at least two fixtures per task area to eliminate shadows. Pendant lights are good for islands and other counters without low cabinets. Recessed lights and track lights work well over sinks and general prep areas with no cabinets overhead.

Ambient lighting: Flush-mounted ceiling fixtures, wall sconces, and track lights create overall lighting in your kitchen. Include dimmer switches to control intensity and mood.

Related: How to Choose the Best Bulb for the Job

More tips on planning a kitchen remodel:

Plan, plan, plan
Keep the same footprint
Get real about appliances
Be quality-conscious
Add storage, not space
Communicate clearly with your remodelers

5. Be Quality-ConsciousFunctionality and durability should be top priorities during kitchen remodeling. Resist low-quality bargains, and choose products that combine low maintenance with long warranty periods. Solid-surface countertops, for instance, may cost a little more, but with the proper care, they’ll look great for a long time.

And if you’re planning on moving soon, products with substantial warranties are a selling advantage.

Related:

Kitchen Remodeling Decisions You'll Never Regret

White: The Savvy and Chic Kitchen Color Choice

More tips on planning a kitchen remodel:

Plan, plan, plan
Keep the same footprint
Get real about appliances
Don't underestimate the power of lighting
Add storage, not space
Communicate clearly with your remodelers

6. Add Storage, Not SpaceStorage will never go out of style, but if you’re sticking with the same footprint, here are a couple of ideas to add more: 

Install cabinets that reach the ceiling: They may cost more — and you might need a stepladder — but you’ll gain valuable storage space for Christmas platters and other once-a-year items. In addition, you won’t have to dust cabinet tops.

Hang it up: Mount small shelving units on unused wall areas and inside cabinet doors; hang stock pots and large skillets on a ceiling-mounted rack; and add hooks to the backs of closet doors for aprons, brooms, and mops.

Related: Storage Options that Pack More Space in Your Kitchen

More tips on planning a kitchen remodel:

Plan, plan, plan
Keep the same footprint
Get real about appliances
Don't underestimate the power of lighting
Be quality-conscious
Communicate clearly with your remodelers

7. Communicate Clearly With Your RemodelersEstablishing a good rapport with your project manager or construction team is essential for staying on budget. To keep the sweetness in your project:

Drop by the project during work hours: Your presence broadcasts your commitment to quality.

Establish a communication routine: Hang a message board on site where you and the project manager can leave daily communiqués. Give your email address and cell phone number to subs and team leaders.

Set house rules: Be clear about smoking, boom box noise levels, available bathrooms, and appropriate parking.

Be kind: Offer refreshments (a little hospitality can go a long way), give praise when warranted, and resist pestering them with conversation, jokes, and questions when they are working. They’ll work better when refreshed and allowed to concentrate on work.

More tips on planning a kitchen remodel:

Plan, plan, plan
Keep the same footprint
Get real about appliances
Don't underestimate the power of lighting
Be quality-conscious
Add storage, not space

Solar Christmas Lights: Should You Make the Switch?By: Alyson McNutt English

Published: December 1, 2011

Solar Christmas lights don’t cost anything to operate, but the high purchase price might not add up to savings.

Now there’s a new kid in the string-light neighborhood: LED solar Christmas lights are appearing at retailers around the country, promising grid-free festive lighting for holiday-happy consumers.  

Powering up solar Christmas lights

A string of solar Christmas lights uses a small solar panel for power; there are no extension cords that must be plugged into outlets. The panel — about the size of a hockey puck — powers rechargeable batteries that illuminate a 25- to 100-bulb string of LED lights.

Panels come with small stakes so you can put them in the ground, where they can take advantage of the sun. A fully-charged string of lights should glow for 6 to 8 hours after the sun goes down. 

Solar lights vs. LED plug-in costs

Most consumers expect new technologies to cost more, but if saving energy and money is your main reason for considering solar-powered LED holiday lights, solar lights may not offer enough cost-saving to offset the higher initial purchase price.

Compare purchase prices:

• The average cost for a 100-light string of miniature solar-powered LED lights is about $0.30 per bulb, or about $30 per string.

• The average cost for a 100-light string of miniature plug-in LED lights is $0.08 per bulb, or about $8 per string.

Compare costs to operate:

• Operating a string of plug-in LED Christmas lights for 300 hours — more than enough hours for an entire holiday season — costs about $0.30, using an average energy cost of $0.11 per kilowatt hour.

• Solar-powered Christmas lights, of course, don’t cost anything to operate. That means you’re saving 30 cents per year in energy costs.

Do the math, and you’ll see that it’ll take about 45 years for the energy savings from solar-power to equal the difference in purchase price between a plug-in string and a solar-powered string.

Advantages of solar lights

• no extension cords

• no need for exterior electrical outlets

• withstand cold temperatures and precipitation

• zero cost to operate

• light output comparable to plug-in lighting

• a green option

Disadvantages

• higher initial cost to purchase

• may not operate under cloudy skies

• unproven longevity (too new on the market for results)

How to Make Sure Your Fireplace is Safe By: Douglas Trattner

Published: September 18, 2012

Here’s what to look for to ensure your fireplace is safe and up-to-snuff.

Checking From the Outside

Examine the chimney to make sure a chimney cap is present and in good repair. The metal cap keeps animals, rain, and snow out of the chimney, while acting as a spark arrester that prevents hot embers from landing on your roofing.
 
If you have a multi-story home or a steep roof, play it safe and use a pair of binoculars to check the chimney cap from the ground.

While you’re at it, make sure:

• There’s no bird nest or debris buildup on the cap.

• There are no tree limbs above or near the chimney.

• The mortar and bricks on the chimney aren’t crumbling or missing.

• The chimney rises at least 2 feet above where it exits the roof.

• The chimney crown -- the sloping cement shoulders at the top of the chimney -- is beveled, which helps air flow.

• The flue liner is visible above the chimney crown.

• The chimney is plumb and not leaning to one side or the other.

• The roof flashing is tight against the chimney.

If you spot anything amiss, call a licensed chimney professional or mason to remedy the problem. For pricey jobs, make sure to get a second estimate.

Looking Inside Your Home

With a flashlight, inspect the flue damper to make sure it opens, closes, and seals properly. 

“If the damper doesn't seal well, you’ll lose a tremendous amount of heat from the home when the fireplace isn’t in use,” explains Gary Spolar, a licensed sweep and owner of Century Chimney in northeast Ohio.

With the damper open, check the flue for combustible material such as animal nests or other foreign objects. You should be able to see daylight at the top.

Inspect the fireplace surround, hearth, and firebox to make sure there are no cracked bricks or missing mortar. Damage inside the firebox is serious -- have a professionalfireplace and chimney inspection. An inspection costs $79-$500.

Also, check for obvious signs of moisture inside the firebox, which could mean a faulty cap.

Inspecting a Gas-Burning Fireplace

We enjoy gas fireplaces because they’re low-maintenance -- but that doesn't mean they’re no-maintenance. You should:

• Inspect the glass doors for cracks or latch issues.

• Check that gas logs are in the proper position.

• Turn gas off at the shut-off valve and test the igniter.

• Ignite the fire and look for clogged burner holes. If present, turn off gas and clear obstructions with a pin or needle.

Related:

Ideas to Revitalize Your Fireplace

How to Clean Your Fireplace

Source: Houseligic.com

Can One Home Insurance Claim Bump Up Your Annual Premium?By: Dona DeZube

Published: November 7, 2013

Depending on where you live, filing even one claim can push your annual insurance premium up 20%.

When a tree fell on my house during a derecho wind storm last summer, it poked a half-dozen holes about the size of a car steering wheel in the roof. But my husband, Al, and I weren’t in a hurry to call our insurance company.

Call us paranoid, but until we knew how much it was going to cost to repair the roof, we didn’t want to risk letting our insurer know we were even thinking about filing a claim.

Al manages our family’s rental properties and has filed a fair share of insurance claims -- from siding damage after someone drove into a house we own in York, Pa., to having our own hardwood floors ruined when the neighbor’s water heater failed, flooding next to our shared townhouse wall.

Our theory is that every time you file a claim, the insurance company punishes you by raising your premium at the very next renewal. File too many claims and they’ll put you in a special, super-expensive rate class.

Related: What Does Homeowners Insurance Cover?

So I wasn’t totally surprised when InsuranceQuotes.com recently came out with a study saying that in some states, filing just one claim with your homeowners insurer can cause your rates to rise as much as 20%.

Some states where you’ll see double-digit premium increases after filing only one claim, according to the study:

Minnesota21%Connecticut21%Maryland19%California18%Oregon17%Arizona17%Alaska17%But if you live in other states, your premiums will barely budge after you file a claim:

Texas0%*New York1%Florida2%Vermont2%Massachusetts2%*In Texas, insurers aren’t allowed to boost premiums after your first claim.

What Gives? Why So Different from State to State?

The differences come down to the rules states set for insurance companies and the difference in weather from state to state, says InsuranceQuotes.com Senior Analyst Laura Adams.

And what sounds bad -- being in a state where rates get bumped up pretty heavily after the first claim -- can actually be a good thing.

“In some states where we’re seeing big rate increases, consumers are getting low rates to begin with,” she explains. If you live in one of those states and never file a claim, you continue to get the advantage of the low initial rate. If you file a claim, however, you pay a heck of a lot more after that claim.

And what sounds good -- being in a state where your insurer either doesn’t bump your premium for filing a claim or bumps it only a bit -- can be bad because you may be paying a pretty high premium to begin with, especially if you’re in a state prone to weather-related insurance claims like hurricane-prone Florida.

Careful What You Say When You Call Your Insurer

Imagine how mad you’d be if your premium went up because you called to talk about a claim you were thinking about filing but didn’t file. Suppose, for example, I called my insurance company to talk about that tree limb that fell on my house and said I might be filing a claim, but only if the damage is more than my deductible.

If the insurance company’s customer service representative hears me use the word “claim,” she might open a claim and put that tree damage information in my permanent insurance track record. That could happen even if I opted not to file the claim. Then, I wouldn’t get the claim payment and I might still have my premium rise the next year.

But wait, it gets worse. Claims filed by the people who lived in your house before you did can also cause your premiums to rise. That’s because your CLUE report includes claims filed by anyone who lived at your address for the past five to seven years. So maybe you only filed one claim, but if the prior owner filed two homeowners insurance claims, your insurance premium is underwritten as though you filed all three claims.

You know what else can make your homeowners insurance premiums rise? Having neighbors who file claims. Insurance companies create rates by ZIP code, points out Amy Bach, executive director of United Policyholders, a consumer advocacy group.

“It’s not just the claims you file, it’s the claims your neighbors file, and sometimes it’s just the insurance company just plain trying to make more profit,” she says.

What’s a Homeowner to Do?

1. Don’t play your insurance claim card unless you have a catastrophic loss.

2. Don’t file a claim for less than your deductible. If it’s a close call, say a $750 claim on a policy that has a $500 deductible, think before you file. Is the $250 you’d get ($750 claim less $500 deductible) worth the chance that your premium will rise?

3. Check your permanent insurance record, called a CLUE report. It’s a list of every claim you’ve filed in every property you’ve insured and all the claims filed for your property in the past five to seven years.

4. Ask that mistakes in your CLUE insurance report be fixed. If you called to ask a question and it got recorded as a claim, for instance, get that corrected.

5. Think really hard before you file a second, or worse, a third claim. If you’ve had past claims or prior owners filed claims, every claim could be the one that’s one claim too many and causes the company to tell you they’re not renewing your policy or raising your rates substantially.

Related: How to Correct Mistakes on Your CLUE Insurance Report

I would tell you exactly how many claims is too many, but there’s no universal, industry-wide official number of claims that is too many, according to Michael Barry, vice president of media relations for the Insurance Information Institute.

He points out that insurers have to take natural disasters and other community-wide events into account. For example, there are likely homeowners in the Northeast who’ve filed three claims because they were hit by Hurricane Irene, the derecho that dropped the tree on my house, and Superstorm Sandy.

Personally, I suspect the magic number is three. Bach -- despite 29 years of advocating for consumers and analyzing insurance issues – has never been able to uncover the magic number either. “It feels like three claims in five years will get you canceled,” she agreed. “But I don’t know what it is.” United Policyholders dug into the issue when it attempted to restrict insurance companies in California from levying rate increases following minor claims, but the rules remained a mystery to the consumer advocacy group.

You could ask your agent or call your insurance company, but it’s hard to find someone who knows and will tell you what the company’s rules are when you file a claim, Bach says. And by the way, she adds, your company may pay your agent an annual incentive based on how many claims his customers file -- so the fewer claims you file, the more money he makes.

The bottom-line: Every time you file a claim, it’s a financial crapshoot. So don’t file unless there’s major money at stake. And if you decide to call your insurance company to discuss the issue, you literally need to repeatedly say that you’re not, not, not filing a claim.

Related:

Homeowners Insurance Companies Want to Limit Your Roof Coverage

Decipher Your Homeowners Insurance Policy

"Home buyers need to be extra vigilant about inspections in the early stages of a purchase because if problems are discovered too late in the process, it can "dash home owners' dreams and budgets," writes Yahoo! Finance in a recent article."