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Year-end ’08 personal tax strategy: Claim special property tax deduction for nonitemizers

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in Small Business Tax,Small Business Tax Deduction Strategies

It often makes sense for itemizers to prepay state and local property taxes. But there’s no tax benefit for nonitemizers, such as your elderly parents or in-laws, who claim the standard deduction.

Strategy: Encourage nonitemizers to prepay this year. Reason: The new housing law creates a special property tax deduction for nonitemizers.

The deduction can be claimed in addition to the standard deduction. But it can’t exceed the lesser of $1,000 ($500 for single filers) or the taxes actually paid for the year. To qualify for this tax break, property taxes must be reported on 2008 returns.

Tip: This tax break was initially available for 2008 only. But recent legislation extends it through ’09.   

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