Yet another taxpayer-friendly provision in the tax code that will be expiring at the end of 2010 is the increase in standard deduction for real estate taxes paid.  (If you’ve been following these posts, you’ll realize that this is another “stealth increase” in taxes, beginning in 2011.) In today’s tax law and until you’ve paid your taxes for 2010, this is how it works:  If you use the Standard Deduction – that is, if the total of your itemized deductions doesn’t exceed the Standard Deduction amounts – you are allowed to take an additional increase in your standard deduction for real estate taxes paid during the tax year.  This amount is the lesser of the actual amount that you paid in real estate taxes or $1,000 for a married couple filing jointly (MFJ).  The amount is $500 for single filers. Beginning with tax year 2011, this increase goes away completely.  For many folks this can represent a direct increase in taxes – if you’re MFJ and in the 25% bracket, for example, this means you will pay an additional $250 in taxes.

Photo by woodleywonderworks

IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (or in any attachment) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication (or in any attachment).