Always alert for news that can be of use to my Indiana bankruptcy and foreclosure clients, I was very interested to learn about a tax provision spearheaded by Indiana Representative Baron Hill and Indiana senator Evan Bayh as part of the new housing bill. In my earlier bankruptcy blog, Housing Bill Offers Help Avoiding Foreclosure, I explained the national housing bill just passed by Congress, which focuses on first time home buyers and on refinancing of mortgages. In working on the tax break as part of the housing bill, Bayh and Hill wanted to help Hoosiers who are coping with declining home values and rising property taxes by adding a tax break for property taxes paid..
In order to understand this tax break, you need to know that up until now, only those folks who itemized their deductions on their federal tax returns were able to take a deduction for property taxes paid. That meant that those people who claimed just the standard deduction couldn’t get any advantage from having paid property tax. Under this new provision, non-itemizers can deduct up to $500 of their property tax from federal taxes (families can deduct up to $1000). It may seem like a small thing, but actually almost one million Indiana homeowners will be able to benefit from this break.
I talk with thousands of people in my bankruptcy law offices in Anderson, Bloomington, Columbus, and Indianapolis. For some of these people, the new tax break will be “too little, too late”. In other words, the tax break will not provide them with enough savings to help them avoid foreclosure on their home or to stave off bankruptcy. The way I see it, though, any financial benefit that can offer help to homeowners is an effort in the right direction.