Real Estate Property Tax Deduction

Question: As a home-owner, may I deduct my real estate taxes that I paid on my residence on my 2008 tax return?

Answer:

The deduction of residential real estate tax is a little more complicated for 2008, and 2009, than previously. Although the treatment of residential real estate is substantially the same as before, some taxpayers may fare somewhat better for 2008 and 2009.

Prior to the 2008 tax year, it was necessary for the homeowner to have enough itemized deductions on Schedule A, including the real estate tax, to exceed the standard deduction allowable for the year. (The 2008 standard deduction amounts are $10,900 on a Joint Return or Surviving Spouse Return, $8,000 for a Head of Household filer, and $5,450 on an Unmarried or Married, Filing Separate Return. There are some additions to the above amounts for taxpayers that are age 65 and over or are blind.)

For 2008 and 2009 a home owner that does not have enough itemized deductions to exceed the allowable standard deduction for their filing status may still get some benefit from the payment of residential real estate tax in addition to the full amount of the standard deduction. The homeowner may claim an additional standard deduction of $500 ($1,000 on a joint return). If the actual amount of real estate paid is less than these amounts, then the addition to the standard deduction is limited to the amount of real estate tax actually paid. Remember, as individual taxpayers we are on a cash-basis. That means the tax must be paid during the year in order to be a deduction for tax purposes. If your real property tax is paid by your mortgage company from an escrow account the taxpayer may only deduct the property tax if the mortgage company makes the tax payment by December 31.