New housing bill Increased Standard Deduction

[BulldogTom]

I was just reading up on the new housing bill and read that Congress has increased the Standard Deduction for people who pay property taxes but don't itemize. The standard deduction increases by the amount of property taxes paid, up to 500 single and 1000 MFJ.

Anyone heard how IRS will put this into the tax form? I assume we will have a new box on page 2 of the 1040 that we fill in the amount of property tax?

This is a good thing for some of my clients who are just below the standard deduction on schedule A.

Tom

Lodi, CA

[jainen]

>>how IRS will put this into the tax form<<

You'll have to complete Schedule A(PT) or Schedule A(PT-MFJ). These are actually just worksheets that do not get attached to the return. This will break out any taxes allocated to office in home or other non-eligible costs including credits for tax paid in escrow instead of directly to taxing agencies. Carry the result from Line 72 to Form 1040 Line 40 and mark the new checkbox 39c (or comparable 1040A lines--it isn't available on Form 1040-EZ or 1040NR). Write "Sec. 63(c ) (7) Property Tax Deduction" at the top of the return, which isn't eligible for electronic filing. For tax planning purposes we will now have to consider "bunching" the standard deduction where it might affect non-refundable credits.

Of course, all this is just a wild guess because the bill has not even been signed into law yet.

[Jack from Ohio]

The increased standard deduction will be added to next years stimulus check, and will only be available after filing the 2008 tax return by April 15, 2009. Otherwise the deduction will be forfieted.

[BulldogTom]

I assume Jack and Jainen are pulling my leg. I understand that the law has not been signed yet, but the President has indicated he will sign the bill.

This was just one provision that I did not hear about during the debate on the bill, and I was seeking comment.

I wonder how long it takes Jainen to come up with these responses, because that one was pretty good. I had to read it twice before I came to the conclusion that he was typing "tongue in cheek".

Tom

Lodi, CA

[zeke]

"I wonder how long it takes Jainen to come up with these responses,"

All we know for sure is that he did this one in less than 1 hour 45 min. I carry several scars from encounters with him. He does it so effortlessly and rapidly that I often feel his efforts are underutilized here. He could make a fortune in Hollywood.

zeke

[MAMalody]

<<<I wonder how long it takes Jainen to come up with these responses, because that one was pretty good. I had to read it twice before I came to the conclusion that he was typing "tongue in cheek".>>>

That's one reason he shouldn't do that, at least, without some type of disclaimer or notification.

[zeke]

"That's one reason he shouldn't do that, at least,"

I prefer that he does - he helps keep life interesting!

z

[BulldogTom]

Jainen is still one of my favorite "personalities" on this board. When I really want a critical review of my thought process, there is none better. I have whip marks on my ego from him, but I bear them proudly. His help has been invaluable, and he dispenses it to all of us without bias. I hope he never stops coming to this board.

Tom

Lodi, CA

[jainen]

>>he shouldn't do that, at least, without some type of disclaimer<<

I labeled my post "a wild guess" in the final sentence, which is the most prominent line.

Still, although I meant it humorously, I do believe it is a reasonable prediction. I believe there WILL be a new checkbox on Line 39c that will point to a worksheet for Line 40. I believe it will not be available for 1040-EZ or 1040-NR. I believe there will be software glitches that make manual filing necessary in some cases, and I believe there is an opportunity for tax planning.

[BulldogTom]

I did not initially think about the Schedule C angle. But I assume it would allocate between office in the home and the 1040 just as it does now with the Schedule A. Any chance Congress will screw up the wording and we get a double dip? Portion allacable to the home office on the C and fully included in the standard deduction on the 1040?

Tom

Lodi, CA

[jainen]

>>Any chance Congress will screw up the wording and we get a double dip?<<

By definition, Congress can't screw up. Whatever they say, is the law. In this case the law will say you can't base the new deduction on taxes used to determine AGI under Section 62(a), that is, business expenses. Now it's down to President Flip-Flop, who said he would veto it before he said he would sign it.

[MAMalody]

My point was, if it takes two reads to determine the validity of the answer, we have missed the point of the board. I do not mind any nontax postings or poking fun at the IRS or congress or the way forms should, could or would work. I, personally, don't want to have to stop after reading any or all postings, in general or from a specific individual and determine if they are jesting or trying to actually answer a question.

I agree, that jainen has made a significant contribution to this board and can argue both sides of almost any issue which forces us to think through what we are doing or going to do. After all, iron does sharpen iron.

Just my two cents worth.

[jainen]

>>it takes two reads to determine the validity of the answer<<

I can't help it. Both the question and the answer were clearly speculative, written in future tense about something that everyone knows has not been approved yet. The topic was interesting and appropriate to the board. The detail in my answer had an ironic tone, but was an honest attempt to suggest the parameters of the issue in a good-spirited way. That's as valid as it gets.

[JohnH]

---> I can't help it. Both the question and the answer were clearly speculative, written in future tense about something that everyone knows has not been approved yet. <----

All this talk about verb tenses reminds me of the guy who jumps into a cab in Boston and asks "Do you know where I can get scrod?"

The cabbie replied, "Buddy, I've heard that question hundreds of times, but you're the first person to ever use the pluperfect subjunctive."

(Sorry, I can't help it either.)

[BulldogTom]

The President signed the bill this morning.

Apparently his desire to put 300 Billion into Freddie and Fannie overcame his objection to giving 4 Billion to local communities to buy forclosed homes to use for low income housing programs.

So we have a new standard deduction for those with property taxes but not enough deductions for Schedule A. I think this is the only good provision in the bill - oops, I mean law.

Tom

Lodi, CA

[jainen]

>>to use for low income housing programs<<

I'm not aware of any restrictions on what can happen to these properties once the government money is channeled to the private parties. And anyway that's only a little more than 1% of the money that will be go to the owners of Fannie and Freddie (which, like the Federal Reserve, are PRIVATE corporations). Whatever happened to the idea that conservative leadership would get the government out of our business and let the free market work?

[BulldogTom]

>>to use for low income housing programs<<

I'm not aware of any restrictions on what can happen to these properties once the government money is channeled to the private parties.

I saw a piece on MSNBC or something like that where the 4 Billion would go to communities to PURCHASE forclosed homes in high forclosure areas. The question was asked, what are these cities/counties going to do with the properties they bought? The answer was to help low income families purchase homes. That was were I got that information. It may not be a requirement, but it is where I understood the 4 Billion was going.

[jainen]

>>MSNBC.... it is where I understood the 4 Billion was going<<

Well, it might not be what is understood by the people who get to skip the propaganda campaign and actually decide what to do. Not only does the law give them free reign in the matter, the state machine doesn't even have to let the local guys in on it. Turn off your TV and use the Internet to read the actual document.

My guess -- hey, this is just another guess, not intended to fool anyone -- is that most of the four billion with a B will go to so-called administration of so-called non-profits established specifically to grab the pork in the name of so-called housing.

[zeke]

>>most of the four billion with a B will go to so-called administration of so-called non-profits established specifically to grab the pork in the name of so-called housing. <<

I must have more faith in my governor than you do in yours. I am fully convinced that Blagojevic will have Illinois share spent bofore the money is printed. And Illinois will still be $3,000,000,000. out of budget! :wacko:

[Catherine]

>>Any chance Congress will screw up the wording and we get a double dip?<<

By definition, Congress can't screw up. Whatever they say, is the law. In this case the law will say you can't base the new deduction on taxes used to determine AGI under Section 62(a), that is, business expenses. Now it's down to President Flip-Flop, who said he would veto it before he said he would sign it.

I disagree; the mere fact that Congress' screw-ups become law does not change the fact that they screw up (and durned near everything they touch gets screwed up in one way or another, in my view).

They have simply developed an efficient method for codifying idiocy.

This opinion is most decidedly worth every penny you have paid for it.

Catherine