New IRS Tax Deductions Worsen Mortgage Debt Deal

The new IRS property tax deductions make mortgage debt an even worse deal than it already was.

2008 and 2009 tax years allow you to take the standard deduction but also deduct $1,000 in property taxes (if married filing jointly, or $500 if single) simply by checking box 39c on Form 1040.

IRS Standard Tax Deductions for 2008 Tax Return
(ie, no "itemized" Schedule A needed)

$ 5,450 (single)
$ 5,950 (single, property tax deduction)
$10,900 (couple, married filing jointly)
$11,900 (couple, married filing jointly, property tax deduction)
$14,000 (senior couple, age 65 or older, married filing jointly, property tax deduction)

Non-senior singles can deduct almost $6k without itemizing and without paying a penny in mortgage interest.

Non-senior couples can deduct almost $12k without itemizing and without paying a penny in mortgage interest.

Senior-citizen couples can deduct $14k without itemizing and without paying a penny in mortgage interest.

These deductions are in addition to the $3.5k per person deductions ("personal exemption") for yourself and dependents.

The IRS tax changes are another reason on top of recent market declines as to why debt does not pay.

I warned about such issues before the market crash:

Prepay Mortgage V. Invest in Stock Market
Myth of Mortgage-Interest Income-Tax Deduction
Myth of the Stock Market (Leveraged Borrow-To-Invest Dangers)

Save Money on Your Winter Home-Heating Costs

Some people muse idly about the coming winter's fuel costs as if it were a storm over which they have no control. However, you do control your heat costs. Moreover, if everyone did these smart actions, lower demand would put downward pressure on fuel prices.

• Insulate: What would you think if someone left his/her front door wide open all winter and then complained about his/her heating costs? Lax insulation is like leaving your front door open in winter. First, inspect your current insulation. You can upgrade from minimum to average or from average to super-insulated. The roof is the most important because heat rises. Control air infiltration/leaks with caulk, etc. When it comes to heat retention, windows are only the next best thing to a hole in the wall, so use the best combination of storm windows, shutters, plastic films, thermal drapes, etc.
• Use Free Heat: Manage your windows to use free solar heat gain (insolation) through the glazed surfaces (eg, glass). Make a solar space to trap solar-heated air against your building (eg, cover the interior of a screen porch in black, fill it with thermal masses (water jugs, lawn mowers), and cover the exterior screens with clear plastic). Manage your yard to landscape for best solar gain on the whole house in winter. Basically, do the opposite of summer home-cooling techniques. Basements are free passive geothermal heat sources, when even their typical geothermal-heat 40-50F degrees are better than zero-degree (0F) outside air temperature (check radon gas if necessary). Earth-sheltered homes maximize free, passive, geothermal heat.
• Reduce Usage/Lower Demand: Conservation (not burning fuel) is the cheapest and easiest method to keep heating costs low. Insulation helps after you already have heated a space, but consider all the heating and fuel-burning that you do not need to do in the first place. Size/service/clean your furnace to peak efficiency, which is like raising the MPG on your car (otherwise, you are burning gallons without any heat benefit, simply burning money). Get a programmable thermostat that lowers heat while you are at work or sleeping under blankets. Lower your "standard" temperature a few degrees and wear a sweater (yes, the cliche actually works extremely well). Make "winter rooms," the old-fashioned method to keep the key part of the house at standard temperature (keep water-pipes above freezing or shut-off/drain the pipes from, say, an upstairs bathroom) and close-off unnecessary square footage (adjust heat registers/vents, close/add doors between rooms, etc.), such as the "exercise room" that is more of a junk room anyway. Winter rooms simulate the efficiency of studios, tiny homes, or other low-cost, efficient, simple-living lifestyles.

Let me know if I forgot anything.

Good luck.

Crossposted from Inexpensive Home Building

Avoid Holiday Travel Costs with Virtual Visits

Look Who's Coming to 21st-Century Dinner

National Public Radio (NPR) yesterday interviewed a woman who could not afford airfare to visit family. High fuel prices raise the cost of air and road travel.

Better than a card or phone call:

Use a webcam to virtually visit for almost free.

You might already own the computer, internet connection, and webcam needed to virtually visit distant family (and webcams are cheap now).

You can park the monitor like another seat at the dinner table (fun gimmick).

A large TV display beside the table might feel like another table.

Virtual visiting also can help when little Billy might be bored at Grandma's house but can play with his cousin across the country.

Simplify Your Bills and Life: Streamline Paperwork

The paperless society never materialized. A paper trail is valuable in a financial dispute but many people are awash in useless paper. You can keep what you need and shred the rest.

Use might some combination of these options:

• Keep a shredder where you take in and open mail. Reduce handling by making a keep-or-shred decision the first time you see something. Handling each item 3 times is like asking the mailman to triple your junk mail.
• Designate a container for what you keep (an envelope for a particular utility or a carry-handle box for everything) and then winnow the contents as necessary to use “make it fit” for inventory control.
• Save only a key page or part of a page (maybe a summary for the gas bill, maybe the itemized list for credit cards). You might get a 5-page statement of which you need only a third of the page.
• Save only recent bills (or more of recent bills and less of old bills).
• Save only “red letter day” details (important milestones).
• Save only endpoints (opening and closing a loan).
• Save only records of what you paid (v. what you owe, for which you often find no shortage of people to remind you).

Wizard of Oz Lesson for Your Personal Finance

Dorothy in The Wizard of Oz finally learned that she always had the power to achieve her goal. The solution to financial freedom always has been and still is available to you or anyone who wants it.

Note: I separated this message from another post: Declare Independence from Housing Slavery: A Famous 4th of July Lesson on Personal Finance.

Declare Independence from Housing Slavery: A Famous 4th of July Lesson on Personal Finance

The 4th of July is an anniversary of this famous American's important personal-finance decision:
Personal Independence Day Built Affordable Home

Opt-Out of Junk Mail To Stop Identity Theft

Get Rich Slowly posted 2 useful links to stop unwanted credit offers and junk mail. You can use these opt-outs to prevent identity theft since dumpster diving for thrown-out junk mail (even ripped applications) is a tactic of identity thieves.

Credit bureaus opt-out from credit offers such as pre-screened or pre-approved credit cards (Federal Trade Commission (FTA) endorsed), or call 1-888-5-OPTOUT

Direct Marketing Association (DMA) opt-out from junk mail

See also: List of Identity Theft Blockers: How Many Do You Use?