One of the best homeowner tax breaks is the ability to deduct your annual real estate taxes.
For many homeowners, property taxes are second only to interest paid. That's especially true during the early years of a mortgage when most of your monthly payments go toward the finance charge.
Later on in the loan's life, the amount of interest you pay decreases. Property taxes, however, always seem to go up, either because the value of your home increased (yes, that used to happen and it will again once we work through this housing cycle) or your local government bumped up your tax rate.
But even then, if property taxes are the only itemized deduction you can claim, your property tax bill probably did you no good when it came to your federal taxes.
You only itemize if your total amount of expenses claimed on Schedule A are more than your standard deduction amount. And most of us don't own mansions that could produce real estate taxes that exceed our standard deduction amounts.
So a few years ago, Congress decided to give homeowners who claimed the standard deduction the ability to include some of their property tax payments in that standard amount. For the 2008 and 2009 tax years, single filers could add up to $500 in property tax to their standard deductions; married couples filing jointly were allowed a $1,000 addition to the standard deduction amount.
That option, however, expired at the end of 2009.
Homeowners hoped that the property tax standard deduction add-on would be part of the tax breaks extended by the tax bill signed into law on Dec. 17, 2010.
No such luck.
Although the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 continued the itemized deduction for private mortgage insurance (PMI) payments, lawmakers left out the property tax standard deduction option.
No reason was given why one homeowner tax break survived but the other was left lapsed. But it's a safe bet that Capitol Hill numbers crunchers found that the property tax write-off cost the federal Treasury more than does the PMI deduction.
So sorry homeowners who claim the standard deduction. Your property tax payments won't do you any deduction good on your 2010 (or beyond) tax return.
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- Fighting rising property taxes
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