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Monday, October 5, 2009

A little extra from Uncle Sam

What I learned in tax class last night:  You don't have to itemize on Schedule A this year to be able to deduct your real estate taxes.

The IRS has added an option to increase your Standard Deduction by $500 or $1,000 (MFJ), as long as your real estate taxes are higher than those amounts.

Example:  Sarah and John own their home and have an adjusted gross income of $50,000.  They paid off their mortgage but still owe real estate taxes every year, which were $2,000 last year.  They file Married Filing Joint, and get a standard deduction of $10,900, which reduces their taxable income to $39,900.   By adding their real estate taxes to their Standard Deduction, it increases by $11,900, which reduces taxable income to $38,900.  The difference in tax between the two income levels is $150 in taxes.

The ceiling on the deduction is $1,000.     You can find out more about all of this at or by consulting a tax advisor.

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