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

[Updated on Jan. 7, 2010 with info for 2009 tax year.]

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 doesn’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 f0r 2008 tax year, 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.

To claim the extra deduction f0r 2009 tax year, check box 40b on Form 1040 (or box 24b on Form 1040A) and attach Schedule L. The extra deduction is calculated on lines 7-9 on Schedule L.

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 tax years. 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.

Reference:

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Comments

  1. charles vandermosten says

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

  2. Harry Sit says

    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 says

    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. Harry Sit says

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

  5. KD says

    I am going to pay about $500 in property taxes in 2010. No escrow. I will use standard deduction for 2009. No property taxes paid in 2009. Should I prepay my 2010 property taxes in 2009 to get this deduction? I will in all probability not itemize for 2010 either.

  6. Harry Sit says

    KD – I don’t see any downside. The worst case is you paid the tax too soon in 2009 and you still don’t get the deduction. You only lose some interest which is really small. $500 in property tax is a bargain by itself. You don’t want to know what my property tax is.

  7. Ron Zulian says

    For the Property Tax deduction for those who dont itemize. Due do law changes and county software problems my 2009 property tax (usually due on about Nov. 15) will not be due until 01/30/2010. Can I still take the deduction for 2009 or do I have to hope they extend the deduction and wait until the 2010 tax filing to claim the deduction

  8. Harry Sit says

    Ron – It’s not about when the tax is due. It’s about when you *paid* the tax. If you paid the tax in 2009, you can take the deduction. If you didn’t pay in 2009, you will have to see if the law is extended for 2010.

  9. JT says

    Would this deduction work for two single people who both own a home and live together? One files head of household and itemizes deduction with property tax and the other files single with standard deduction.

  10. Harry Sit says

    JT – I’m not a CPA. Please read the Form 1040 instructions (pp. 35, 166). For 2009 tax year, there is a new Schedule L. The itemizer already includes property tax in the itemized deductions. If the person who uses standard deduction also pays property tax, I don’t see why he/she can’t claim this extra $500.

  11. Alyssa says

    Hi, My husband and I bought a house on Nov 19 2010. We had to pay 1,272 at closing for taxes from 11/19/09 to 07/01/10. Can I deduct this on my 2009 taxes?

    Thanks

  12. Allison says

    I’m in a similar situation…bought a house on 11/6/09, paid money at closing for property taxes from nov 6-Dec 30…but didn’t make a mortgage payment until Jan 1, 2010. Do I still get to claim the deduction?
    Thank you!

  13. archy says

    Schedule L , line 2 when answer no to the question, instructs you to put the amount on line 1 on line 4 , skip line 3 and go to line 5 ,
    this reults in a total of 6,200 for a single status (500 + 5700)
    is this a mistake or am I misreading it ?

  14. Harry Sit says

    Alyssa and Allison – If you paid property tax in 2009, it doesn’t matter if you paid at closing or if you paid separately. Fill out Schedule L to calculate your standard deduction.

    archy – If you also filled out lines 7-9 on Schedule L, that extra $500 is for the property tax deduction I wrote about here.

  15. cph says

    My 2008 Tennessee property taxes were due by 2/28/2009. I paid them a few days before the due date. I file a joint return with my wife. Can I add $1000 to my standard deduction on my 2009 tax return?

  16. Brendan says

    I filed 2009 taxes electronically and ended up with $500 extra beyond what I claimed for a tax return. I used turbotax and it did not catch any “mistake”. It seems that this property tax break could account for that.

  17. Doris says

    can you tell me exactly what I can take from the real property tax statement is it the GORSS TAX amount or the NET TAX ans ASSSSMENT amount/
    Or maybejust hte state of WA general fund amount?

  18. Doris says

    we claimed our daughter she is 17
    she worked with income of 2700.00
    they withheld federal income tax of 123.00
    should I file a return for her to get this back if so we claimed her so waht does she file herself as?

  19. david says

    My fiance and I bought a home in 2009. We are obviously filing separately since we are not yet married. The mortgage is entirely in my name. However, we are both on the deed to the home. Our property taxes are paid in escrow. I am itemizing, and she is taking the standard deduction. Can she get the $500 deduction since both our names are on the deed to the house, even though I am the only name on the mortgage (which pays our prop. tax through escrow)?

    I know this is similar to JT’s question (#11), however it sounds like both he and his partner are on the mortgage possibly.

    Thanks

  20. Harry Sit says

    David – It doesn’t matter whose name is on the mortgage. The key question is how much property tax each of you pays. And it’s not what you pay into escrow. You have to find out how much the escrow account paid out to the tax collector during the year and divide up that amount between the two of you.

  21. ZaZa says

    Thanks for the info! I didn’t know it until I read your article. Now my question is, I didn’t claim this tax deduction for year 2008. Is there a way I can reclaim it and have my money back?

    Thanks!

  22. Mary says

    Where, on earth, do I put this itemized property tax deduction on the H & R Block At Home software????? I’d have been done with my taxes months ago if it wasn’t for this!!!!!

  23. Harry Sit says

    Mary – Have you tried entering the property tax in the deductions area and see if the software automatically includes a Schedule L when you print your complete return? Even if you e-file (I don’t), it’s a good idea to see what your return looks like before you e-file.

  24. Harry Sit says

    Kathy – Aren’t property tax and real estate tax the same thing for this purpose? Copy line 21 on Schedule L to line 24a on Form 1040A. Then check box 24b on Form 1040A.

  25. Kathy says

    I have an amount for real estate taxes from my mortgage company and then an amount for property taxes. i also paid property taxes on another piece of land that i own. can i claim both?

  26. chris says

    First, do we have to send in a receipt showing we paid property taxes our is it our word of honor? Second, I paid my 2009 property taxes last month. Can I claim it on my 2009 federal tax form? or I am only allowed to claim my 2008 property taxes(which I paid in 2009) on my 2009 federal tax form

  27. Harry Sit says

    Chris – No receipt is necessary. You have to prove it if you are audited. Only for taxes actually *paid* in 2009, not which year it’s for. In your case it would be 2008 property taxes paid in 2009.

  28. Portland Real Estate says

    I’m trying so hard to do my own taxes but it seems so overwhelming. Thanks for the great article though!

  29. Buffy says

    This is the first time I am doing my taxes online myself on freetaxusa…I am itemizing … I see mortgage interest tax paid line…but where and how do I claim Real Estate Taxes paid…I am the head of household…not married..?

  30. Kat says

    Hi, I’ve looked high and low for an answer to this question. I am renting a house but I’m buying a piece of land down the road on a land contract. Each year I’m responsible for the taxes on this land. Can I deduct the taxes I pay on this land on my income taxes? Can I use this deduction everyone is talking about if I didn’t itemize? And if so how do I file an amendment to get this tax credit? And lastly I will actually be moving to this piece of land and living on it year round. I got electricity brought back to it last year and can now make a stand out there in my camper. Will this change how I do a deduction of what kind of deduction I’ll get?

    My mate has been unemployed for two years and has not unemployment benefits left so we are being forced to move to the property and try to live on the land in the camper. But it’s better than being on the streets or homeless. I could use all the deduction I can get right now. Thanks for you help!

  31. jane says

    Hi,

    I did not claim deduction in 2009 and will file an amended return, do i need to attach any documents? If yes, what kind?

    Thanks.

  32. Joe says

    Try to find ANYTHING in 2011 IRS tax sites that describes the elimination of the $500 or $1000 Real Estate Tax add-on to the Standard Deduction. It’s like “hush-hush” while pointing out the increase in the Standard Deduction for everyone but Married Filing Jointly – a discrimination that they don’t discuss either!

    I vote for FLAT TAX. 11 percent of any profit. Eliminate the annual gerrymandering of the tax laws.

    Of course a bunch of tax lawyers, software makers, and government bureaucrats would all be on unemployment.

    It would be worth it. The tea needs to go in the harbor NOW!

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