Last year, homeowners could not take a deduction for state and local property taxes unless they itemized all of their deductions instead of choosing to use the standard amount.
This uncharitable state of affairs left homeowners who chose the standard deduction out in the cold.
Well, here’s a little good news: Congress’s Housing and Economic Recovery Act changed the old law, and now everyone who pays property tax can claim at least some of that cash on the Form 1040. So non-itemizers, take heart. You can deduct a portion of your property tax after all.
The new law allows non-itemizers to add up to $500 of property taxes per person to the standard deduction. If you are filing jointly with your spouse, instead of claiming the ordinary standard deduction of $10,900, you can claim an extra $1,000 ($500 for you and $500 for your spouse). Single filers who would usually claim a $5,450 standard deduction can now claim up to $5,950. Of course, you can only claim the extra $500 if you actually paid $500 of property tax to your state or local government.
Who is the new law most likely to help? You should consider claiming the additional deduction if you’re a lucky homeowner who has already paid off your mortgage and can no longer claim the home mortgage interest deduction. Unless you have a fistful of other itemized deductions, such as the employee expense deduction or the casualty loss deduction, chances are high that the new and improved standard deduction is right for you.
Last, but not least, if you’re an itemizer, you cannot claim this deduction. But check back with us tomorrow to learn about how you can deduct the entire amount of your property tax, and some income or sales tax too.
Be sure to check out the complete archive of Daily Deductions.