Saver’s Credit: A Retirement Tax Break for the Middle Class

Saving for retirement is even more rewarding if your earnings are low enough to qualify for the Saver’s Tax Credit. For 2021, single filers with adjusted gross income of $33,000 or less may be eligible. Taxpayers married filing jointly must have an AGI of $66,000 or less. (For 2020, the thresholds are $32,500 and $65,000, respectively.)

Fall within the income limits and you can claim a tax credit worth up to $1,000 for singles or $2,000 for joint filers. The credit is based on 10%, 20% or 50% of the first $2,000 ($4,000 for joint filers) you contribute to retirement accounts, including 401(k)s, traditional IRAs and Roths. The lower your income, the higher the percentage you get back via the credit.

People with disabilities who have an ABLE account can also take advantage of the Saver’s Credit. Contributions to these accounts qualify for the credit, so long as they’re from the designated beneficiary.

Some people can’t claim the Saver’s Credit, regardless of income. Taxpayers under 18, full-time students and those claimed as dependents aren’t eligible. But if you do qualify, every dollar you claim is one dollar less you have to pay in taxes.

To claim the credit, you’ll need to complete Form 8880 and submit it with your tax return.

Source: kiplinger.com

Adoption Tax Credits (Federal & State) – Requirements & Eligibility

The decision to adopt a child is a big one for any prospective parent, and one of the concerns often has to do with costs. Adoption-related expenses can vary widely depending on whether you work with an agency, adopt from foster care, work directly with the birth parents, or adopt internationally.

Fortunately, there are federal and state assistance programs that minimize financial obstacles to adoption.

Federal Adoption Tax Credit and Adoption Assistance Programs

The U.S. Tax Code provides two separate assistance programs for prospective adoptive parents. Both programs help cover qualified adoption expenses, which the IRS defines as:

  • Reasonable and necessary adoption fees
  • Court costs and attorney fees
  • Traveling expenses (including meals and lodging while away from home)
  • Other expenses directly related to the legal adoption of a child

To qualify, you must pay the expense to adopt a child under the age of 18 or someone of any age who is physically or mentally incapable of self-care. Qualified expenses don’t include expenses paid to adopt a stepchild.

Adoption Tax Credit

The federal adoption tax credit is worth up to $14,300 per child for the 2020 tax year.

Parents who adopt a “special needs” child automatically qualify for the maximum credit, regardless of their actual adoption expenses. The IRS’s definition of a special needs adoption might differ from definitions used elsewhere.

The adoption must meet all three of the following criteria to qualify as a special needs adoption:

  1. The child was a citizen or resident of the U.S. or its possessions when the adoption effort began.
  2. The state determined that the child can’t or shouldn’t return to their parent’s home.
  3. The state determined that the child probably wouldn’t be adoptable unless it assists the adoptive family financially.

Based on those criteria, foreign adoptions aren’t considered special needs. Also, U.S. children with disabilities might not be regarded as special needs if the state doesn’t consider them difficult to place for adoption.

Income Limitations

However, the amount of the federal adoption tax credit phases out for high-income taxpayers. It begins to phase out once your modified adjusted gross income (MAGI) reaches $214,520 and phases out entirely at $254,520.

The credit phases out proportionally if your income is between $214,520 and $254,520.

So if your income is $234,520 — the midpoint of the phase-out range — the amount of your credit is cut in half. If your income is $224,520 — one-quarter of the phase-out range — the amount of your credit is reduced by 25%.

The income limits apply whether you’re single or married and file a joint tax return with your spouse. The adoption tax credit isn’t available if your filing status is married filing separately.

Refundability

The adoption tax credit is nonrefundable. In other words, if it reduces your tax liability for the year below zero, you won’t receive the excess as a tax refund.

However, you can carry any unused credit forward for up to five years, using it to offset your tax liability in the future.

When You Can Claim the Credit

The rules for claiming the credit depend on whether the adoption is domestic or foreign.

Domestic Adoptions

If you adopt a U.S. child, you can claim adoption expenses for the tax year following the year of payment, even if you never finalize the adoption. However, any costs you used to claim the credit on an unsuccessful adoption will reduce the amount you can claim for a subsequent adoption.

For example, say you started the adoption process in 2018, but the adoption fell through. You used $3,000 of expenses to claim the adoption tax credit on your 2019 return.

In 2020, you made another attempt to adopt, spending $10,000, and successfully finalized the adoption that year. When you claim the adoption credit on your 2020 tax return, you can only claim $7,000 of expenses ($10,000 – $3,000).

Foreign Adoptions

If you adopt a child who isn’t yet a citizen or resident of the U.S. or its possessions, you can only claim the credit in the year the adoption becomes final.

For example, say you start adopting a child from Ukraine in 2019 and spend $5,000 that year. You cannot claim the adoption tax credit in 2019 because you didn’t finalize the adoption.

In 2020, you spent another $8,000 and finalized the adoption. You can use all $13,000 of expenses to calculate the credit on your 2020 tax return.

You can claim the federal adoption tax credit by completing Form 8839 and attaching it to your federal income tax return, Form 1040.

Employer-Provided Adoption Benefits

Some employers reimburse employees for adoption expenses. The IRS offers a tax break for these benefits as well, as long as the adoption assistance program meets the following criteria:

  • The program benefits all eligible employees, not just highly compensated employees.
  • The program doesn’t pay more than 5% of its benefits to shareholders or owners (or their spouses or dependents).
  • The employer must give reasonable notice of the plan to eligible employees.
  • Employees must provide reasonable substantiation (such as receipts or other documentation) to show that the payments or reimbursements are for qualifying expenses.

If the program meets that criteria, then the payments or reimbursements don’t count as taxable income on the employee’s federal income tax return, and the employer doesn’t have to withhold federal income tax from the payment. However, the employer must still withhold Social Security and Medicare taxes.

Adoptive families can take advantage of both the adoption tax credit and the income exclusion. However, you can’t claim the exclusion and the credit on the same expenses, and the maximum dollar limit ($14,300 for 2020) still applies.

For example, say you have $15,000 of qualified adoption expenses in 2020, and your employer’s adoption assistance program reimburses a maximum of $9,000. You can use the remaining $5,300 of expenses to calculate your adoption tax credit on your 2020 tax return.

That’s the $14,300 maximum dollar limit, minus the $9,000 of expenses already reimbursed by your employer. You won’t get any tax benefits for the remaining $700 of expenses ($15,000 – $14,300).


State Adoption Tax Credits

Many states offer tax credits for families who adopt children from the public child welfare system. Here’s a summary of tax credits available in each state as of the 2020 tax year:

State Tax Credit Amount
Alabama Yes Up to $1,000
Alaska No income tax
Arizona No
Arkansas Yes Up to 20% of the federal adoption tax credit claimed
California Yes Up to $2,500
Colorado No
Connecticut No
Delaware No
District of Columbia No
Florida No income tax
Georgia Yes Up to $2,000
Hawaii No
Idaho No
Illinois No
Indiana Yes The lesser of $1,000 or 10% of your claimed federal adoption tax credit
Iowa Yes Up to $5,000
Kansas Yes 25% of the adoption tax credit claimed on your federal tax return (up to $1,500)
Kentucky No
Louisiana No
Maine No
Maryland No
Massachusetts Yes Income exemption for adoption fees paid to a licensed adoption agency
Michigan No
Minnesota No
Mississippi Yes Up to $2,500
Missouri Yes Up to $10,000
Montana Yes Up to $1,000
Nebraska No
Nevada No income tax
New Hampshire No tax on wages
New Jersey No
New Mexico Yes Up to $1,000
New York No
North Carolina No
North Dakota No
Ohio Yes Up to $1,500
Oklahoma Yes Tax deduction for up to $20,000 of expenses
Oregon No
Pennsylvania No
Rhode Island No
South Carolina Yes Tax deduction for up $2,000 of expenses
South Dakota No income tax
Tennessee No tax on wages
Texas No income tax
Utah Yes Up to $1,000
Vermont No
Virginia No
Washington No income tax
West Virginia Yes Up to $4,000
Wisconsin Yes Up to $5,000
Wyoming No income tax

The rules for claiming adoption tax breaks vary by state and can change from year to year, so talk to your tax advisor to make sure you qualify.


Final Word

Adopting a child can strain family finances, but tax credits can help offset the costs.

And once you’ve finalized the adoption, remember you may be able to take advantage of several more tax breaks for parents. This includes claiming your adopted child as a dependent and claiming the child tax credit and the child and dependent care credit.

Source: moneycrashers.com

Adoption Tax Credits 2020 (Federal & State) – Requirements & Eligibility

The decision to adopt a child is a big one for any prospective parent, and one of the concerns often has to do with costs. Adoption-related expenses can vary widely depending on whether you work with an agency, adopt from foster care, work directly with the birth parents, or adopt internationally.

Fortunately, there are federal and state assistance programs that minimize financial obstacles to adoption.

Federal Adoption Tax Credit and Adoption Assistance Programs

The U.S. Tax Code provides two separate assistance programs for prospective adoptive parents. Both programs help cover qualified adoption expenses, which the IRS defines as:

  • Reasonable and necessary adoption fees
  • Court costs and attorney fees
  • Traveling expenses (including meals and lodging while away from home)
  • Other expenses directly related to the legal adoption of a child

To qualify, you must pay the expense to adopt a child under the age of 18 or someone of any age who is physically or mentally incapable of self-care. Qualified expenses don’t include expenses paid to adopt a stepchild.

Adoption Tax Credit

The federal adoption tax credit is worth up to $14,300 per child for the 2020 tax year.

Parents who adopt a “special needs” child automatically qualify for the maximum credit, regardless of their actual adoption expenses. The IRS’s definition of a special needs adoption might differ from definitions used elsewhere.

The adoption must meet all three of the following criteria to qualify as a special needs adoption:

  1. The child was a citizen or resident of the U.S. or its possessions when the adoption effort began.
  2. The state determined that the child can’t or shouldn’t return to their parent’s home.
  3. The state determined that the child probably wouldn’t be adoptable unless it assists the adoptive family financially.

Based on those criteria, foreign adoptions aren’t considered special needs. Also, U.S. children with disabilities might not be regarded as special needs if the state doesn’t consider them difficult to place for adoption.

Income Limitations

However, the amount of the federal adoption tax credit phases out for high-income taxpayers. It begins to phase out once your modified adjusted gross income (MAGI) reaches $214,520 and phases out entirely at $254,520.

The credit phases out proportionally if your income is between $214,520 and $254,520.

So if your income is $234,520 — the midpoint of the phase-out range — the amount of your credit is cut in half. If your income is $224,520 — one-quarter of the phase-out range — the amount of your credit is reduced by 25%.

The income limits apply whether you’re single or married and file a joint tax return with your spouse. The adoption tax credit isn’t available if your filing status is married filing separately.

Refundability

The adoption tax credit is nonrefundable. In other words, if it reduces your tax liability for the year below zero, you won’t receive the excess as a tax refund.

However, you can carry any unused credit forward for up to five years, using it to offset your tax liability in the future.

When You Can Claim the Credit

The rules for claiming the credit depend on whether the adoption is domestic or foreign.

Domestic Adoptions

If you adopt a U.S. child, you can claim adoption expenses for the tax year following the year of payment, even if you never finalize the adoption. However, any costs you used to claim the credit on an unsuccessful adoption will reduce the amount you can claim for a subsequent adoption.

For example, say you started the adoption process in 2018, but the adoption fell through. You used $3,000 of expenses to claim the adoption tax credit on your 2019 return.

In 2020, you made another attempt to adopt, spending $10,000, and successfully finalized the adoption that year. When you claim the adoption credit on your 2020 tax return, you can only claim $7,000 of expenses ($10,000 – $3,000).

Foreign Adoptions

If you adopt a child who isn’t yet a citizen or resident of the U.S. or its possessions, you can only claim the credit in the year the adoption becomes final.

For example, say you start adopting a child from Ukraine in 2019 and spend $5,000 that year. You cannot claim the adoption tax credit in 2019 because you didn’t finalize the adoption.

In 2020, you spent another $8,000 and finalized the adoption. You can use all $13,000 of expenses to calculate the credit on your 2020 tax return.

You can claim the federal adoption tax credit by completing Form 8839 and attaching it to your federal income tax return, Form 1040.

Employer-Provided Adoption Benefits

Some employers reimburse employees for adoption expenses. The IRS offers a tax break for these benefits as well, as long as the adoption assistance program meets the following criteria:

  • The program benefits all eligible employees, not just highly compensated employees.
  • The program doesn’t pay more than 5% of its benefits to shareholders or owners (or their spouses or dependents).
  • The employer must give reasonable notice of the plan to eligible employees.
  • Employees must provide reasonable substantiation (such as receipts or other documentation) to show that the payments or reimbursements are for qualifying expenses.

If the program meets that criteria, then the payments or reimbursements don’t count as taxable income on the employee’s federal income tax return, and the employer doesn’t have to withhold federal income tax from the payment. However, the employer must still withhold Social Security and Medicare taxes.

Adoptive families can take advantage of both the adoption tax credit and the income exclusion. However, you can’t claim the exclusion and the credit on the same expenses, and the maximum dollar limit ($14,300 for 2020) still applies.

For example, say you have $15,000 of qualified adoption expenses in 2020, and your employer’s adoption assistance program reimburses a maximum of $9,000. You can use the remaining $5,300 of expenses to calculate your adoption tax credit on your 2020 tax return.

That’s the $14,300 maximum dollar limit, minus the $9,000 of expenses already reimbursed by your employer. You won’t get any tax benefits for the remaining $700 of expenses ($15,000 – $14,300).


State Adoption Tax Credits

Many states offer tax credits for families who adopt children from the public child welfare system. Here’s a summary of tax credits available in each state as of the 2020 tax year:

State Tax Credit Amount
Alabama Yes Up to $1,000
Alaska No income tax
Arizona No
Arkansas Yes Up to 20% of the federal adoption tax credit claimed
California Yes Up to $2,500
Colorado No
Connecticut No
Delaware No
District of Columbia No
Florida No income tax
Georgia Yes Up to $2,000
Hawaii No
Idaho No
Illinois No
Indiana Yes The lesser of $1,000 or 10% of your claimed federal adoption tax credit
Iowa Yes Up to $5,000
Kansas Yes 25% of the adoption tax credit claimed on your federal tax return (up to $1,500)
Kentucky No
Louisiana No
Maine No
Maryland No
Massachusetts Yes Income exemption for adoption fees paid to a licensed adoption agency
Michigan No
Minnesota No
Mississippi Yes Up to $2,500
Missouri Yes Up to $10,000
Montana Yes Up to $1,000
Nebraska No
Nevada No income tax
New Hampshire No tax on wages
New Jersey No
New Mexico Yes Up to $1,000
New York No
North Carolina No
North Dakota No
Ohio Yes Up to $1,500
Oklahoma Yes Tax deduction for up to $20,000 of expenses
Oregon No
Pennsylvania No
Rhode Island No
South Carolina Yes Tax deduction for up $2,000 of expenses
South Dakota No income tax
Tennessee No tax on wages
Texas No income tax
Utah Yes Up to $1,000
Vermont No
Virginia No
Washington No income tax
West Virginia Yes Up to $4,000
Wisconsin Yes Up to $5,000
Wyoming No income tax

The rules for claiming adoption tax breaks vary by state and can change from year to year, so talk to your tax advisor to make sure you qualify.


Final Word

Adopting a child can strain family finances, but tax credits can help offset the costs.

And once you’ve finalized the adoption, remember you may be able to take advantage of several more tax breaks for parents. This includes claiming your adopted child as a dependent and claiming the child tax credit and the child and dependent care credit.

Source: moneycrashers.com

More Monthly Child Credit Payments, Higher Child Care Credit, and Other Tax Breaks in Biden’s Latest Plan

In March, the American Rescue Plan Act made several tax credits better. And, in one case, it requires the IRS to send monthly payments to families with children. However, the enhancements are only temporary – they only apply for the 2021 tax year.

The Biden administration sees those temporary improvements as simply a first step. So now President Biden wants to extend the expanded tax credits and continue supporting low- and middle-income families, as well as low-income workers without children, with tax reductions beyond this year.

That’s the goal of the tax-cutting provisions in the president’s American Families Plan. The $1.8 trillion package would also do many other things for ordinary Americans, such as providing universal pre-school, free community college, guaranteed family and medical leave, caps on child-care costs, and much more. All these – along with the extended tax credit enhancements – are designed to “build a stronger economy that does not leave anyone behind.”

It’s way too soon to tell if any of the tax credit extensions – or any other part of the American Families Plan – will make it through Congress and be signed into law. There will be stiff resistance from Republicans in Congress, and a few Democrats are likely to push back on some of the more costly items, too. Biden’s plan is just the starting point for further negotiations, so we’ll just have to wait and see how things progress from here. But in the meantime, we can take a look at the 4 tax credit enhancements that President Biden wants to extend. If you qualify, you’re already going to save a lot of money in 2021. If the extensions become law, you could pocket even more cash in 2022 and for years to come.

1 of 4

Child Tax Credit

picture of a happy family at home on their sofapicture of a happy family at home on their sofa

For tax years before 2021, the child tax credit is worth $2,000 per dependent child 16 years old or younger. It begins to phase out if your adjusted gross income (AGI) is above $400,000 on a joint return, or over $200,000 on a single or head-of-household return. Once your AGI surpasses $400,000 or $200,000, the credit amount is reduced by $50 for each $1,000 (or fraction thereof) of AGI over the applicable threshold amount. Up to $1,400 of the child credit is refundable for some lower-income individuals with children. But you must also have at least $2,500 of earned income to get a refund.

Thanks to the American Rescue Plan, the 2021 credit amount is increased to $3,000 per child ($3,600 per child under age 6) for many families. Children who are 17 years old qualify for the credit, too. The credit is also fully refundable for 2021, and the $2,500 earnings floor is eliminated. In addition, the IRS will pay half of this year’s credit in advance by sending monthly payments to families from July to December 2021. (To see how much you’ll get, use Kiplinger’s 2021 Child Tax Credit Calculator.)

The new American Families Plan, if enacted, would generally extend the 2021 child tax credit enhancements through 2025 (including, presumably, the monthly payments). There would be one important difference, though. The new plan would make the credit full refundable on a permanent basis.

For more on the 2021 credit, see Child Tax Credit 2021: Who Gets $3,600? Will I Get Monthly Payments? And Other FAQs.

2 of 4

Child and Dependent Care Credit

picture of young children gathered around a preschool teacher who is reading a bookpicture of young children gathered around a preschool teacher who is reading a book

The American Rescue Plan also expanded the child and dependent care tax credit for 2021. This will boost tax refunds for many parents when they file their tax return next year.

For the 2020 tax year, if your children were younger than 13, you were eligible for a 20% to 35% non-refundable credit for up to $3,000 in childcare expenses for one kid or $6,000 for two or more. The percentage dropped as income exceeded $15,000.

The American Rescue Plan made several enhancements to the credit for the 2021 tax year. First, it made the credit refundable for the year. It also bumped the maximum credit percentage up from 35% to 50%. More childcare expenses are subject to the credit, too. Instead of up to $3,000 in childcare expenses for one child and $6,000 for two or more, the 2021 credit is allowed for up to $8,000 in expenses for one child and $16,000 for multiple children. When combined with the 50% maximum credit percentage, that puts the top credit for the 2021 tax year at $4,000 for families with just one child and $8,000 for families with more kids. The full credit will also be allowed for families making less than $125,000 a year (instead of $15,000 per year). After that, the credit starts to phase-out. However, all families making between $125,000 and $440,000 will receive at least a partial credit for 2021. (For more information, see Child Care Tax Credit Expanded for 2021.)

The American Families Plan would make these enhancements permanent. If it becomes law, parents paying for childcare will continue to see lower tax bills and/or higher refunds until their youngest kid turns 13.

3 of 4

Earned Income Tax Credit

picture of a fry cook standing with arms folded in front of a grillpicture of a fry cook standing with arms folded in front of a grill

The earned income tax credit (EITC) provides an incentive for people to work. And, under the American Rescue Plan, more workers without qualifying children will qualify for the credit on their 2021 tax return and the “childless EITC” amounts will be higher.

For 2020 tax returns, the maximum EITC ranges from $538 to $6,660 depending on your income and how many children you have. However, there are income limits for the credit. For example, if you have no children, your 2020 earned income and adjusted gross income (AGI) must each be less than $15,820 for singles and $21,710 for joint filers. If you have three or more children and are married, though, your 2020 earned income and AGI can be as high as $56,844. If you don’t have a qualifying child, you must be between 25 and 64 years old at the end of the tax year to claim the EITC.

The American Rescue Plan expanded the 2021 EITC for childless workers in a few ways. First, it generally lowers the minimum age from 25 to 19 (except for certain full-time students). It also eliminates the maximum age limit (65), so older people without qualifying children can claim the 2021 credit, too. The maximum credit available for childless workers is also increased from $543 to $1,502 for the 2021 tax year. Expanded eligibility rules for former foster youth and homeless youth apply as well.

Under the just-released American Families Plan, the credit enhancements for childless workers will be made permanent. If enacted, the enhancements for workers without children would join other changes made by the American Rescue Plan that continue past 2021 to:

  • Allow workers to claim the EITC even if their children can’t satisfy the identification requirements;
  • Permit certain married but separated couples to claim the EITC on separate tax returns; and
  • Increase the limit on a worker’s investment income from $3,650 (for 2020) to $10,000 (adjusted for inflation after 2021).

4 of 4

Premium Tax Credit

picture of a stethoscope laying on several one-hundred dollar bills picture of a stethoscope laying on several one-hundred dollar bills

The premium tax credit helps eligible Americans cover the premiums for health insurance purchased through an Obamacare exchange (e.g., HealthCare.gov). The American Rescue Plan enhanced the credit for 2021 and 2022 to lower premiums for people who buy coverage on their own. First, it increases the credit amount for eligible taxpayers by reducing the percentage of annual income that households are required to contribute toward the premium. It also allows the credit to be claimed by people with an income above 400% of the federal poverty line. According to the White House, these changes will save about 9 million families an average of $50 per person per month.

The American Families Plan would make these changes permanent to lower health insurance costs beyond 2022.

However, it’s not clear if the American Families Plan would extend the suspension of advance payment repayments. When you purchase insurance through the exchange, you can choose to have an estimated credit amount paid in advance to your insurance company so that less money comes out of your own pocket to pay your monthly premiums. Then, when you complete your tax return, you’ll calculate your credit and compare it to the advance payments. If the advance payments are greater than your actual allowable credit, the difference (subject to certain repayment caps) is subtracted from your refund or added to the tax you owe. If your allowable credit is more than the advance payments, you’ll get the difference back in the form of a larger refund or smaller tax bill. The American Rescue Plan suspended the repayment of excess advanced payments for the 2020 tax year. (If you already filed your 2020 tax return and repaid any excess advance payments, the IRS will automatically adjust your return and send you a refund if necessary.)

We suspect that the American Families Plan wouldn’t extend the repayment suspension. This, we believe, was and is intended to be a one-year-only rule to help people struggling during the COVID-19 pandemic.

Source: kiplinger.com

9 Energy-Efficient Home Improvements Worth Your Money

How would you like to invest $30 and be paid a $45 dividend on your investment every year after that?

That’s essentially what you do when you make certain energy-efficient home improvements to lower your expenses.

If you pay for powering your home, you know that the dollars can really add up. The average monthly electricity bill in the U.S. was $115.49 in 2019, but your bill can vary widely depending on where you live — and whether you also rely on alternative energy sources like gas or solar power.

If you take the steps suggested below — especially if you do the work yourself — you could save a bundle. And if you think of the improvements as an investment, you can enjoy a healthy annual rate of return and won’t pay income taxes like you would with regular investment returns.

9 Energy-Efficient Home Improvement Tips That Will Also Save You Money

When you invest in your home to lower your bills, every penny saved is yours to keep.

Ready to get started? Here are nine ways to save money by improving your house.

1. Insulate Your Water Heater

An insulating jacket for your hot water heater will cost $30 or so, and you can install it yourself in about an hour.

According to the experts at the Department of Energy, insulating a hot water tank saves 7% to 16% annually.

In other words, assuming the average hot water costs $438 to operate annually, you’ll have $30 to $70 more in your pocket each year.

If you’re able to make a bigger up-front investment, you may consider replacing your traditional electric water heater with a heat pump water heater.

Instead of generating heat directly, heat pump water heaters act more like refrigerators in reverse — they pull heat into the device instead of pushing it out.

The bigger your family is, the more you’ll save by using heat pump water heaters, according to the DOE. Two people would save $170 every year while a family of four would save $350 a year. The DOE estimates the cost to switch is approximately $800, so that family of four would start seeing savings after a little over two years.

The Energy Star site has a questionnaire to help you decide if heat pump water heaters are a good fit for your home.

A woman adjusts the thermostat.
Getty Images

2. Install a Programmable Thermostat

You don’t need as much heat when you’re in bed at night, and you don’t need as much heating or air conditioning when you are out of the house. But you don’t want to climb out of bed on a cold winter morning or come home to a hot house in the summer.

A programmable thermostat solves these problems by automatically adjusting the temperature settings for you.

Ten minutes before you get up in winter, the heat turns on. Ten minutes before you get home after a hot summer day at work, the air conditioning adjusts to cool the house. You use the heating and cooling only when you actually need them.

A programmable thermostat can save you $50 on heating and cooling costs each year, according to the government’s Energy Star program. Starting around $60, many models are simple enough to install on your own.

3. Switch Out Your Light Bulbs

Another bright idea for savings? Replacing your light bulbs.

Light emitting diode (LED) light bulbs are 90% more efficient than traditional incandescent bulbs and can last up to 20 years.

LEDs used to be expensive for a single bulb, but today, you can get a two-pack of LED bulbs for under $5.

Pro Tip

Before starting a home improvement project, check out the DOE’s Energy Star site to find out if the product you need is eligible for a tax credit or rebate.

By using the LEDs, you can save $4.10 per bulb per year on energy usage compared to an incandescent. The average American household has 50 light bulb sockets, according to the EPA’s Energy Star program, which means a potential annual savings of $205 if you replaced every bulb in your house.

4. Bundle Up Those Water Lines

Bare water lines leak heat, so you have to set the temperature of the hot water heater higher to still get a hot shower at the other end of the house.

Solve this problem with a little pipe insulation: an inexpensive foam tube with a slit down the side. Just cut it to the required length with scissors and push it onto the pipes.

This project will take you about three hours for a small home and cost $10 to $15 total, according to the Department of Energy. Each year, you’ll save 3% to 4% heating your water.

5. Replace Your Ceiling Fans

Ceiling fans in general can help you save on heating and cooling costs.

In the summer, run the fan blades counterclockwise to generate a cool breeze — thus reducing the need to run the more expensive air conditioning. Running the blades clockwise helps circulate warm air that rises back down into the room, helping cut heating costs in the winter.

You can realize even more savings by replacing your old, inefficient fans with Energy Star certified fans, which are 60% more energy efficient than older models, according to the DOE. (And be sure to use your energy efficient light bulbs in the fixtures.)

A woman opens up the fridge in her home.
Getty Images

6. Buy a New Refrigerator

If your refrigerator is working fine, there’s normally no good reason to replace it, even if the new one is a bit more efficient. But if you have a fridge that’s more than 15 years old, it might be time to replace that one.

A new fridge uses about $80 less in electricity each year compared to one from 2005.

7. Insulate Your Attic

If you run your heater or air conditioner most days, you might save some serious money by adding new insulation to your attic.

Upgrading attic insulation from R-11 to R-49 is something you can do by yourself in a day or two for about $750, according to HouseLogic.com. (The cost is about double if you want professionals to install it.)

You’ll save about $600 per year on heating and cooling costs, depending on where you live and the type of heat you have. It also adds value to your home if you decide to sell in the future.

8. Seal Those Air Leaks

Check for cracks or spaces around door frames, windows and entry points for pipes and cables. You lose heat from these gaps during the winter and cool air in the summer, adding to your heating and cooling costs.

It takes about $20 in caulking and peel-and-paste insulating strips to seal these up all over the house.

Pro Tip

If you’re looking to replace an exterior door, a steel or fiberglass door is a more energy efficient option than wood. Some steel doors even have insulated cores, so no need for weatherstripping.

The experts at Energy Star say doing this will cut your heating and cooling costs by an average of 15%, depending where you live. That’s potentially hundreds of dollars saved for an investment of an afternoon and $20. Not bad, right?

9. Replace That Toilet Flapper

If you hear your toilet running when it isn’t being used, you probably have a leaky flapper.

It’s not just an annoyance — a leaky flapper can waste up to 200 gallons of water every day.

Since a new flapper valve can be bought for under $10 and can save you $50 per month, this little investment might have the highest rate of return of any on our list.

Steve Gillman is a contributor to The Penny Hoarder. Staff writer/editor Tiffany Wendeln Connors also contributed to this post.. 



Source: thepennyhoarder.com

Are the Low Mortgage Rates a Home Buyer Trap?

Despite a slight uptick this week, mortgage rates are still pretty much rock bottom, and unarguably at ridiculously low levels.

This has sparked yet another refinance boom, with mortgage application volume rising to its highest point since May 2009, per the latest data dump from the Mortgage Bankers Association.

This is great news for existing homeowners with plenty of home equity looking to refinance to a lower rate. It’s also working out nicely for those who don’t have equity thanks to programs like HARP 2.0.

All in all, it’s a gift to these borrowers who are experiencing some serious monthly mortgage payment relief.

But what about new and prospective home buyers?

Are People Buying Because of the Low Rates?

With rates this low, you have to wonder if it’s all a big trap (whether intentional or not) to lure would-be buyers off the sidelines and into the game.

If you’ve followed the housing market lately, at least in certain regions of the country, such as Los Angeles, homes are speeding into pending status just days after being listed.

In fact, many are pending just one or two days after being listed. It’s looking like a serious seller’s market, though obviously a very unconventional one.

The low rates have increased affordability so much that a new pool of buyers has essentially been created, which has facilitated both standard and short sales.

Again, great news for those who have waited very patiently to sell their homes; many can finally do so!

And perhaps even better for the housing/mortgage market, with seemingly bad loans being replaced with better ones.

Heck, I’m even seeing a ton of flips that are actually selling for a tidy profit. I thought flips were dead?

Reminder of the Homebuyer Tax Credit

But it all seems reminiscent of the boost seen with the now infamous homebuyer tax credit.

That “free money” created a short-lived, yet steep run-up in home prices as first-time home buyers came out in droves.

Just a short time later, it became clear that those who purchased a home did so at a premium, and their tax credit was quickly eclipsed by a larger loss in home value.

If you take a look at this home price chart, you’ll see how the homebuyer tax credit stoked demand, but its effect was clearly fleeting.

In fact, those who purchased before the tax credit expiration were actually worse off compared to those who bought later on.

To bring it all together, home prices were pumped up as a result, similar to what we may be seeing with the record low mortgage rates.

With rates so low, homeowners and their clever real estate agents probably feel they can list their homes for more than they could have six months ago.

And the whole “it’s never been a better time to buy” adage is back.

Economy Still in Disarray

The big problem is that the economy is still a huge mess, with the European crisis hanging over our heads, and domestic unemployment still far from unresolved.

Then there are the millions of homes in the process of foreclosure, or knocking at its door.

So is this artificial stimulus actually going to help the real estate market long-term, or is it just another quick fix with no staying power?

My gut tells me that this recent run-up in prices and virtual 180 in consumer sentiment is bad news.

Getting into a bidding war over a house just months after no one was interested seems really fishy.

Additionally, all these calls of a “housing bottom” are concerning as well. You always have to wonder when every single media outlet (including your local news channel) is claiming that the worst is behind us.

Of course, the low rates have led to lower mortgage payments, even with the recent home price increases factored in.

So there’s some serious power behind those rates. The question is will you be able to buy a home next year at an even better price with a similar (or even lower) interest rate?

Read more: Home prices vs. mortgage rates.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com