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Fundranker Blog—Real Estate Taxes Deduction

Real Estate Taxes Deduction

Until 2008, you had to itemize deductions to be able to deduct real estate taxes from your taxable income. If you took the standard deduction, you had to be satisfied that it included your real estate taxes. Now for 2008 returns, you can take an additional standard deduction up to $500 ($1,000 if married filing jointly) for real estate taxes you paid in 2008. The instructions for Forms 1040 and 1040A have a nifty little worksheet to help you figure your standard deduction. Essentially, it adds your real estate taxes, up to $500 ($1,000 if married filing jointly), to your standard deduction.

For taxpayers who usually itemize deductions, instead of comparing your itemized deductions to your standard deduction, you will need to compare them to your standard deduction plus up to $500 ($1,000 if married filing jointly) for your real estate taxes. When you itemize deductions, you can claim the entire amount of real estate taxes you paid in 2008. If your real estate taxes are considerably higher than the $500 or $1000 limits, it may seem counterintuitive to take the standard deduction plus the limited real estate taxes deduction, but you still need to consider it. For example, if your itemized deductions include, say, $2,500 of real estate taxes, but exceed your standard deduction by only $400, then your standard deduction plus $500 ($1,000 for married filing jointly) would be larger and would reduce your taxable income more than your itemized deductions would.

Posted 3/11/09 9:56am ET in Tax Tips