Interesting Question

[LawrenceGR]

I may be looking too far ahead. I wonder what effect the increase in standard deduction due to property tax will have on some of my clients next year. Here in Mich and I imagine in other states people receive a credit for property tax. The property tax credit becomes a recovery the following year. The question then is if someone receives benefit from this increase in standard deduction(due to property tax) will it become a taxable recovery for 2009?

[WhiteOleander]

I may be looking too far ahead. I wonder what effect the increase in standard deduction due to property tax will have on some of my clients next year. Here in Mich and I imagine in other states people receive a credit for property tax. The property tax credit becomes a recovery the following year. The question then is if someone receives benefit from this increase in standard deduction(due to property tax) will it become a taxable recovery for 2009?

I would think it would. If you deduct something that you later recover, you have to pay tax on it.

[Bert73]

Good question!
But I dont think it would. It is added to the standard deduction and for those that itemize, property taxes have never been recovered income in the following year in all other years.

[Burke]

Good question!
.... and for those that itemize, property taxes have never been recovered income in the following year in all other years.

Any deduction on Sche A which is recovered in a later taxable year is reportable income. See Pub 17, Chapter 12, under Recoveries, page 86.