Homeowners who do not itemize their federal income tax returns would get an additional standard deduction of up to $1,000 for state and local property taxes under a U.S. Senate bill introduced on Wednesday.
The measure, introduced by Democratic Sens. Max Baucus of Montana and Robert Menendez of New Jersey, is aimed aiding seniors and other homeowners with paid-off mortgages by defraying the cost of state and local taxes paid to support public education.
Many U.S. taxpayers are not able to itemize their federal returns because without the substantial income deductions from mortgage interest payments, their other deductions fail to exceed standard deduction amounts.
Homeowners who do not itemize miss out on federal tax savings from deductions for state and local tax payments.
The deduction provided under the bill would be $500 for single filers and $1,000 on a jointly filed return. Non-itemizers would be able to claim the deduction on top of their standard deduction.
“This deduction will help out all honest taxpayers who do their part for public education in their communities and for other local concerns,” said Baucus, the ranking Democrat on the tax-writing Senate Finance Committee.
However, he said the Senate was not likely to act on the bill until next year.
Congress is working to finish up legislative business before an August recess. When it returns in September, lawmakers will have about one month to finish up appropriations bills for the new fiscal year starting October 1 before breaking again to campaign for November elections.
© 2006 Reuters