Ways to Lower the Ongoing Costs of Home Ownership

Photo: cwwycoff1

Owning a home is expensive--it's probably your biggest monthly cost, especially if you factor in not just your mortgage payment, but also your property taxes, insurance, electric, gas, trash and water bills. To reduce some of your ongoing home ownership expenses and make your budget more manageable, consider the following possibilities.

1. Challenge your property tax assessment.
Homeowners who think their property tax bill does not accurately reflect their property’s value can challenge the assessment. For example, if you recently had your home appraised for a refinance and it shows your home’s value is $150,000, and similar homes in your neighborhood have been selling in the $145,000 to $155,000 range, but your property tax bill places your home’s value at $175,000, you may be able to use your evidence to successfully argue for a reduction in your property tax bill based on a taxable value of $150,000.

2. Take advantage of every tax deduction you qualify for.
Because of the way the standard deduction works on your income tax return, the mortgage interest tax deduction isn't always as valuable as people think.

However, for homeowners who have significant itemizable expenses in addition to mortgage interest, home ownership typically has ongoing tax benefits. Home-ownership-related tax deductions allow people to take advantage of other deductions they otherwise wouldn't qualify for because they wouldn't itemize. These include property taxes, state income taxes and charitable donations.

For example, if you normally donate $1,000 a year, if you don't itemize, you won't see any tax benefit from your donation even if it's made to a tax-exempt nonprofit. But if you itemize, the same donation costs you less. If you're in the 25% federal tax bracket, your $1,000 donation will save you $250 on your tax bill. You'll achieve the same rate of tax savings on your itemized state income taxes and property taxes.

Here are some other areas where you might be able to reduce your tax bill by itemizing expenses:
-Donating gently used clothes, household items and furniture to charity
-Personal property taxes
-Gambling losses not in excess of gambling winnings
-Interest on money you borrowed to fund investments

3. Refinance.
Even if you have a fixed-rate mortgage, it makes sense to keep an eye on mortgage rates. You never know when they might drop far enough to suddenly make refinancing a smart idea. If you have an FHA loan, you can do an FHA Streamline refinance even if you're underwater. VA loans also have a streamline option, which you can learn more about at VA mortgage options. Refinancing is a great opportunity to increase your monthly cash flow and your long-term net worth by reducing the amount of interest you pay on your mortgage.

Put these savings in your emergency fund and you won't have to borrow money to make home repairs or upgrades. The ability to pay cash will give you even greater savings since you won't have to spend anything on interest payments. Make sure to ask yourself these six questions before you refinance.

4. Don't buy a home warranty.
This advice probably sounds counterintuitive. Wouldn't a home warranty, which provides coverage to repair or replace many of the major systems and appliances in your home for just a few hundred dollars a year, be a great way to keep maintenance costs to a minimum? Unfortunately, home warranty companies have poor reputations when it comes to customer satisfaction, and the contracts contain lots of fine print that lets home warranty companies get out of paying almost any claim at their discretion. You're better off putting the money into a rainy day house fund for handling unforeseen repairs.

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