Take your property tax deduction without itemizing. It’s another deduction you’ll want to claim on your 2009 tax return, as we continue our series on tax deductions. We recently reviewed the new car tax deduction.

Home ownership can have some enticing tax benefits because you can itemize and deduct home expenditures–such as mortgage interest paid throughout the year–and lessen your tax burden. However, what if you do not have enough qualifying expenditures to itemize your deductions? Prior to 2008, there was no extra tax benefit to home ownership without itemizing your deductions.

With the passing of the Housing Assistance Tax Act for 2008, and its extension for the tax year of 2009 through the Economic Rescue Plan/Tax Extender Package that was signed into law on October 3, 2008, you can claim a tax deduction for some of the property tax that you pay, even if you take the standard deduction.

Property Tax Deduction

The additional amount that can be claimed on top of your standard deduction is the lower of these two options:

• The amount of real estate property taxes paid during the year to state and local governments; or
• $500 for single filers and $1,000 for married taxpayers that are filing a joint return

Who Can Claim the Property Tax Deduction

Any homeowner who takes the standard deduction benefits from this tax law. This most likely includes people who are close to paying off their mortgage, or who have paid off their mortgage, and have not paid enough mortgage interest in 2009 to itemize. Also, people who have purchased a home late in 2009 may not have enough items to deduct in order to itemize.

If you bought a new home, the property tax deduction is in addition to any home buyer tax credits you may qualify for.

Where to Deduct on 1040

On form 1040, you want to report your qualified property tax deduction on line 40, thus lumping it in with your standard deduction. Then on line 39c, check the box that indicates that your standard deduction includes a property tax deduction. If you are using TurboTax, the software will help you locate where to enter your deduction.

To help you figure out how much of a standard deduction to claim, the IRS provides a worksheet on page 35 of their Instructions for Form 1040.  You don’t need to send in the worksheet to the IRS.

Stay tuned for more topics in our tax deduction series and make sure you aren’t leaving any money on the table at tax time!

Written by Amanda

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