Wednesday, March 11, 2009

Partial Real Estate Tax Deduction Available Even for Non-Itemizers

WebCPA points out that a new, "two-year," deduction toward AGI is available for non-itemizers. Key features of the deduction include: [1] up to $500 if single, $1000 if married filing jointly on taxes actually paid, [2] taxes must be on you (apparently, taxes on home of parents qualifying as your dependent do not count), [3] you must actually pay the taxes during the tax year, [4] special assessment taxes do not qualify--the tax must be imposed based on assessed valuation on a general, government-wide basis, [5] qualifying real estate cannot be foreign or property used by a business, [6] must use Form 1040 (line 39c) or 1040A (line 23c) to qualify.

On the one hand, you would think that after years of AMT patching and one-year extensions for incentives such as teacher deductibility of school supplies and state sales taxes that Congress does not need to institute additional fluid income tax provisions. On the other hand, the provision will legitimately help fixed income homeowners and at least some middle-income taxpayers who are not able to itemize. By all means, if you qualify, take advantage of this deduction.


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