Just a note about the property tax rebate that came up in the tax portion of my CLE seminar – if you get a property tax rebate in the same year in which the property tax is paid, the rebate is not considered income, but it does reduce the amount of the exemption you get for having paid the property tax. If the rebate comes in a subsequent year, then it counts as income and is taxable.
Doug–I don’t have much documentation of this yet, but I’ve heard from State House people who probably know that the IRS intends to be flexible in its interpretation of the rebates. Even if they come after the first of the year, I’m told, you’ll be allowed to subtract it from your property tax deduction, or take the full property tax deduction and count the rebate as 2008 income for 2009 taxes. And, if you don’t itemize, you won’t have to count the rebates as income. I hope that’s true especially, because non-itemizers would get penalized if the rebate is income–paying taxes on the rebate and not getting the extra deduction for the higher property taxes. This does surprise me, since I didn’t think the IRS would or could be so flexible. Maybe this time good sense will prevail. –LD
Thanks for the update. I was just regurgitating what I’d heard (or thought I heard) at the Law Update.