4. Property tax addition to standard deductionAnother popular home-related tax break, the property tax deduction, also has been expanded.
Previously, real estate taxes were a welcome tax deduction for homeowners who itemized. These annual payments to county and local governments could be claimed on Schedule A to increase the taxpayer's deduction total.
Now, however, homeowners who do not itemize will get to claim at least a portion of their real estate tax payments as part of their standard deduction. Up to $500 for single homeowners, double that for joint filers, can be added to the taxpayer's standard deduction amount. Simply check box c on line 39 of Form 1040 or line 23 of Form 1040A.
This standard property tax deduction add-on should help homeowners who don't have enough deductions to itemize, but who still pay property taxes each year on their personal residences. It originally applied to just the 2008 tax year, but a provision in the financial industry bailout bill enacted last October extends this tax break through 2009.
5. Surviving spouse home sale tax exclusionA widow or widower has many difficult decisions to make soon after losing a spouse. But a provision in the Mortgage Forgiveness Debt Relief Act of 2007 now offers surviving spouses some tax relief in connection with one of those decisions, the sale of the family home.
In most cases, a seller can exclude up to $250,000 in profit from the sale of a primary residence. The tax-free amount is $500,000 when the home is sold by a married couple filing a joint return.
Under previous law, when a spouse died, the surviving husband or wife could take advantage of the full $500,000 sale exclusion only if the home was sold in the same year the spouse died. If the sale took place after that year, the surviving husband or wife was entitled to only the $250,000 exclusion amount.
Now, however, a surviving spouse can exclude up to the full $500,000 as long as the sale occurs within two years of spouse's date of death. The surviving spouse still must meet the regular ownership and use requirements; that is, the widow or widower must have lived in the property as his or her primary residence for two of the five years before the sale.
There is no sunset date for this tax law. The surviving spouse home sale exclusion relief is permanent.
6. Energy-saving home improvementsIn 2005, the Energy Tax Incentives Act created many tax breaks for homeowners who made energy-efficient improvements to their homes. Several of those tax breaks have been in place for years. More recently, other energy-saving options have been added to the home upgrade list.
The more elaborate energy-saving options, such as fuel cells, wind energy and geothermal and solar heating equipment, are among the tax breaks that have been in continuous effect. However, the easiest home energy improvements for homeowners to make -- installing storm windows and doors, adding insulation, buying a new energy-efficient air conditioner or heat pump -- expired at the end of 2007.