$500 Or $1,000 Property Tax Deduction for People Who Don't Itemize Deductions

February 2, 2009 by TFB

Although I said it doesn't make sense, Congress passed a law last year and gave an extra deduction for property tax to people who don't itemize deductions. Kaye Thomas at Fairmark also thought it was bad tax policy and not justified. Of course what we say don't count. Congress makes laws however it likes. Taxpayers in single, head of household, or qualifying widower filing status, who don't itemize but pay property tax, get up to $500 extra deduction; married filing jointly get up to $1,000. This was initially good for only one year (2008). Then it was extended in the bailout bill to also include 2009 tax year. There is no income limit for this extra deduction.

To claim the extra deduction, check box 39c on Form 1040 and add up to $500 or $1,000 to your regular standard deduction on line 40 (or box 23c and line 24 on Form 1040A). You cannot use Form 1040EZ. Nonresident aliens filing 1040NR or 1040NR-EZ don't qualify.

Please note this extra deduction only applies to property tax, not mortgage interest. If your standard deduction is still larger than your itemized deductions including mortgage interest, you don't get an extra deduction for mortgage interest because it's already included in the standard deduction. It's also only for non-itemizers, only for 2008 and 2009. If you already itemize deductions, you don't get any extra deduction.

If you use tax software, be sure to answer the question about property tax, even if you know you will take the standard deduction. If you don't tell the software you paid property tax, it will not know (duh!), and it will not add this extra deduction for you.

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Comments

5 Comments on $500 Or $1,000 Property Tax Deduction for People Who Don't Itemize Deductions

  1. charles vandermosten on February 14, 2009 | permalink
    2.  

    I only have income from a ny pension and social security-no earned income-is my real estate tax deductable on form 1040a?

  2. TFB on February 14, 2009 | permalink
    3.  

    charles – As far as I know, yes. Use the worksheet on pp. 32-33 in Form 1040A Instructions linked at the end of this post.

  3. Nancy on April 5, 2009 | permalink
    4.  

    Thanks for this. Your answer made me do additional research until I realized my mistake. The limitation related to earned income (e.g. worksheet on page 35 of the Form 1040 instructions) applies only to those who can be claimed as a dependent on someone else's return.

  4. lois huston on April 15, 2009 | permalink
    5.  

    do you need to attach a special form to claim real estate tax of $500 and not itemizing?

  5. TFB on April 15, 2009 | permalink
    6.  

    lois – No. You just add $500 (or $1,000 for married filing jointly) to the regular amount and then check that box.

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