Why Congress Is Still Fighting Over This $5,014 Tax Deduction
Congress has come up with two different ideas on how to reform the tax laws. The House of Representatives got the ball rolling by releasing its proposal first, but the Senate didn't wait long to come up with its own package. The two proposals have a lot in common, but one area where they differ is in the treatment of real estate taxes. The House would allow homeowners to continue to deduct property taxes up to $10,000 per year, while the Senate version would eliminate state and local real estate tax deductions entirely. Below, you'll learn why this could cost the typical American more than $5,000 in itemized deductions and who stands to lose the most from any change in the current law.
Right now, the tax laws allow those who itemize their tax deductions to deduct the money they pay to state and local governments for property tax. This is true whether the collecting jurisdiction is the state, county, or municipal body.
The deduction is based on the amount actually paid during the tax year. So if your tax bill includes amounts that are due in two different calendar years, you typically have a choice: Just pay the required amount this year and deduct that portion of the tax, or pay the entire tax early and claim the whole amount as an itemized deduction in the year you paid it.
Source: Fool.com
