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The Internal Revenue Service is assisting homeowners. Although the effect of this help is really only marginal, it still helps those taxpayers who pay real-estate tax, whether state or local.
A quick primer on real-estate tax, for the uninitiated: The real-estate taxes in question are the taxes paid by property owners to their county, state or municipality. Generally, these taxes are paid twice a year and could run in the range of 0.5 percent to 2 percent of the home's assessed real estate value.
The Internal Revenue Service does not collect your property tax, nor does it really have any sway as to how much you owe in real estate tax. This tax is entirely separate from your income tax calculation (or the calculation of any other tax that the IRS collects).
Nevertheless, the IRS has released some guidelines and assistance for those taxpayers who pay property tax to their local or state taxing bodies.
Basically, if you pay property tax but are not itemizing your tax return, then you are entitled to something called the "standard deduction. "It works this way -- in doing your income tax calculation, you can choose to take your deductions one of two ways. You can deduct all the little deductions that you are entitled to, such as your business expense deductions, your charitable deductions and all the other ones you are eligible for. Or, alternatively, you can choose not to complicate your life and just deduct the standard deduction amount. That is, you can decide to deduct the amount that the IRS has designated as the standard deduction amount for that tax year.
For 2009, the standard deduction amount is:
$5,700 for Single
$11,400 for Married Filing Jointly
$8,350 for Head of Household
$5,700 for Married Filing Separately
$11,400 for Qualifying Widow(er)
This year, single filers can also take an additional $500 deduction or they can deduct the entire amount of real estate taxes paid--whichever is less. Joint filers can take the lesser of a $1,000 deduction or the full amount of real estate taxes paid.
Some quick points on the real estate tax:
To claim the deduction, you fill out form 1040 and attach Schedule L. For more information, visit the IRS website.
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