The recently enacted Housing and Economic Recovery Act of 2008 created numerous benefits for homebuyers, homeowners, and renters, including the temporary first-time home buyer tax credit. Among the other tax incentives, Congress established an additional standard deduction amount for tax year 2008 for property taxes paid for an owner-occupied home.

This additional standard deduction will particularly help 50+ homeowners, who are likely to deduct little or no mortgage interest and thus are less likely to itemize. The new benefit will save these taxpayers several hundred dollars on average for tax year 2008.

The tax code currently allows taxpayers to deduct state and local property taxes, but only if they itemize their deductions on Schedule A of their tax form. Taxpayers who do not itemize, will instead claim the standard deduction (equal to $10,900 for married couples filing a joint return, $5,450 for single taxpayers, and $8,000 for taxpayers filing as heads of household). 

The new provision allows these non-itemizing taxpayers to add an additional amount to their standard deduction. This additional standard deduction is equal to the amount of state and local property taxes they would deduct if they itemized, up to a maximum of $1,000 for married taxpayers and $500 for single taxpayers. The benefit is only available for tax year 2008, to be claimed on tax returns filed in early 2009. [Return to top]