Much of the recent legislative action in Washington has been focused on health and financial reforms.  But another bill dealing with tax issues appears to be in the works as well.  It is expected to be enacted sometime in the next week.  The American Jobs and Closing Tax Loopholes Act will provide one year extensions to a number of tax rules that expired at the end of last year.  The extenders will be made retroactive to the beginning of 2010.  Some of the more notable extensions include:

Property Taxes – The additional standard deduction on real property taxes, $500 for individual filers and $1000 for couples, will be extended.  This is for use by people who don’t itemize their deductions.

Higher Education Deduction – Up to $4000 of qualified higher education tuition and related expenses could be taken as above-the-line deductions.  There are income limitations on who may take this deduction and it’s not available if the expenses are deductible under any other tax program.

Teacher Classroom Supplies Deduction – Up to $250 in out-of-pocket spending on qualifying classroom supplies may be taken as an above-the-line deduction.  On top of that, teachers who itemize their taxes may be able to deduct qualifying expenses that exceed $250 by classifying them as employment related miscellaneous itemized deductions.

Hybrid Vehicles – An alternative motor vehicle credit will continue to be available for hybrid vehicles.  Separate credits are available for cars and light trucks, and for medium and heavy trucks.

Energy Efficient Windows – The bill will modify the terms of the tax credits for energy efficient windows to reflect regional climate differences.

Disaster Relief – A number of programs will be extended to help taxpayers affected by federally declared disasters, including higher allowable loss limits for deductions and a five year carry-back provision for net operating losses.  This could prove to be very important with the hurricane season meteorologists are predicting.

The aftermath of the real estate bubble bursting has many homeowners staying put and retaining their current properties.  If you are one of the many that has not been able to sell your house or are upside down in your mortgage you have two decent options: 1) You can seek the assistance of a realtor that specializes in short sales; or 2) you proactively protect your homes value.  The first thing you need to be aware of is your right to contest/appeal your property assessment.  It happens more often than you may think that states will overvalue your home, resulting in higher property taxes.  There is a catch though; lower property values compiled with foreclosures can bring the value of all properties in the entire neighborhood.  You have to determine if its in your best interest to pay lower taxes or maintain a higher estimated property value.

Another step you can take is to have your home appraised.  This will let you know two very important things: 1) if your property has increased or decreased in value since you purchased it; and 2) the report can help guide the changes needed to increase the value of your home.  Continuing to make marketable improvements in essential areas like bathrooms and kitchens can make dramatic increases to your property’s value.

Participation in community activism sounds a bit ridiculous, but staying involved can pay off in the long run.  Pay close attention to new zoning laws, proposed new developments, and the reputation of your neighborhood’s school district.  Call on your neighbors to help make sure the neighborhood does not deteriorate.  If an abandoned foreclosure is preventing other houses from selling at decent prices, take the initiative to step up and make it look decent.  The lower the properties around you sell for, the lower your property value will be.

And finally, make sure you watch out for new taxes.  Many state and local governments are struggling financially, so they may raise property property taxes to cover shortfalls even though property values are declining.  Pay close attention to these new tax hikes or ask your CPA to alert you when new taxes arise.

Many states, including Maryland, offer a “Renter’s Credit” or “Homestead Property Tax Credit” when you do your income taxes.  This credit is typically based on the difference between  your income and property taxes.  You ask how this could possibly work?  As a renter, though, you do not typically pay property taxes directly, but your landlord does, and those taxes are figured into the monthly rent he/she charges.  So, if you make sure that you hang onto any receipts showing you paid your rent so you can provide documentation if the IRS requests it.  Keep copies of your cancelled checks or ask for receipts from your landlord every month.

When filing for this tax credit, however, it is a good idea to consult with a CPA in Rockville to verify if you do in fact qualify and how much of a deduction you can take.  It can be a bit confusing.