You might be surprised to know that you actually can take a deduction for some or all property taxes you've paid without having to go through the ordeal of itemizing your deductions on your tax return. You’ll have to fill out an extra form, but even a short-form 1040A filer can take advantage of this new deduction. This is a temporary tax break, however, introduced as a provision of the American Recovery and Investment Act of 2009. Take advantage of it while you can!
Complete your 1040 or 1040A as usual until you come to the lines where you choose either to take the Standard Deduction or itemize using Schedule A. Look for a third option – that of taking the Standard Deduction using Schedule L. Check the box to use the Schedule L to claim deductions for property taxes, some casualty losses and certain sales or excise sales taxes paid when you purchased a new vehicle.
Gather your property tax statements, vehicle purchase receipts and Form 4684, which should be filled out if you had casualty losses. In the first section of Schedule L, locate the Standard Deduction amount for your filing status. Enter this amount on line 1. Answer the question on line 2. If you or your spouse can be claimed by anyone else as a dependent, your base standard deduction will be limited on line 3 to your earned income plus $300. If this does not apply, skip line 3 and enter the standard deduction again on line 4.
Multiply the amounts shown on line 5 by the number of boxes checked if you (and your spouse, if filing jointly) are over age 65 and/or blind. Enter the total or enter zero if none of the boxes are checked. The amount you enter here will increase your standard deduction. On lines 6 and 7, enter disaster losses and the amount of your real estate taxes. Enter the appropriate amount on line 8 for your filing status: $1,000 for married filing jointly or $500 for all others. Line 9 tells you to enter the smaller of the actual property tax amount or the $500 ($1,000 for married filing jointly) limit from line 8. This is the maximum amount of real estate tax you are allowed to claim.
Continue through the form or if you don't need to calculate the deduction for taxes paid on a new vehicle purchase, go directly to line 21. Line 21 simply adds the amount of your regular standard deduction to the amounts you've already computed for the extra deductions. Carry the total to the appropriate line of your 1040 or 1040A form and finish computing your taxes as usual.
You may only claim a real estate tax deduction for amounts you or your mortgage company actually paid during the tax year. For the purposes of this calculation, real estate taxes do not include any fees assessed as special assessments or for services, such as municipal water. If a special assessment is included in your property tax statement and is based on the value of the real estate, however, it can be included. Example: A special assessment for sewer maintenance in your district, assessed at 3 percent of your real estate value, is deductible; a flat fee of $40 per month is not deductible.
If you received any rebates or offsets against current-year taxes during the year, those amounts must be deducted from the total real estate taxes claimed on Schedule L.
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