You probably know about taking deductions to reduce your tax liability. To be clear, deductions are not the same as tax credits – deductions are applied to your earned income before calculating taxes, and thus reduce the amount on which you are taxed. Tax credits are more valuable, and are a direct credit towards the tax that is due.
When you do your taxes each year, you can either take a standard deduction, or you can keep a record of tax deductible expenses and choose to use that if it is greater. For 2008 the standard deduction is $5450, or $10,900 if married filing jointly.
It seems that many people I speak to have not heard that this year you can claim at least some of your property taxes as a deduction, even if you do not itemize your expenses. The law allows you to add your real estate taxes to the standard deduction.
There is a limit of $500, or $1000 for joint filers, so it can save you paying taxes on $1000 of your income. This is all part of the plan to stimulate the housing market.