Housing Assistance Tax Act of 2008

There's been another change in tax laws which will benefit homeowners this year. The IRS will allow up to $1000 in real estate tax deduction for non-itemizers. What this means to you is:

When you do your taxes each year, you have the option to either itemize, or use the standard deduction.

Usually you'll itemize if you have a significant number of tax deductions, such as mortgage interest, property taxes, or significant medical or dental expenses. You'll add these deductible amounts up and subtract them from your income in order to figure your taxable income.

However, the IRS also gives you the option to take a standard deduction amount - no questions asked, no receipts needed - without itemizing. These amounts differ depending on your filing status and a few other factors, but for a married couple filing jointly this year, the standard deduction is $10,900.

This means that if a married couple's itemized expenses are less than $10,900, they're better off taking the standard deduction.

So, for someone who just purchased a home this year, this can be frusturating. "I thought I would be able to deduct my property taxes and mortgage interest this year!!" they say. Well, if you bought the property in, say, October, you might not have paid enough in mortgage interest & taxes in 2008 to exceed the standard deduction amount.

However, this year, the IRS is giving you a little present :-) Even if you are not itemizing your deductions because they don't exceed the standard deduction amount, the government will allow you, as a homeowner, to deduct an additional $500 ($1000 if married filing jointly) for property taxes you paid.

Add that to the list of "why now is a great time to buy"!