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BY MEGGEN LINDSAY
Times Staff Writer | Tuesday, December 30, 2003 | (No comments posted.)
Filing Indiana income tax returns for 2003 will prove a little trickier this year, thanks to the reassessment and the resulting late property tax bills.
State officials fear that late property tax bills in Lake County -- and in at least 17 other counties across the state -- have left homeowners confused about what deductions they are allowed to take for this year and 2004.
On the state income tax return due in April, homeowners may deduct property taxes only for those taxes actually paid this year, said Larry McKee, deputy commissioner of the Indiana Department of Revenue.
Indiana homeowners are permitted to subtract up to $2,500 in property taxes from their taxable income. The maximum $2,500 deduction will reduce an individual income tax bill by $85.
"Our main concern is for the people who aren't paying the full (property tax) amount in 2003. They really are not entitled to the full deduction unless they've actually made those payments," McKee said.
In Porter County, where the final property tax bill was due in December, residents can deduct the full amount on their income taxes.
But in Lake County, where homeowners' tax bills amounted to 70 percent of last year's property taxes, residents are eligible to take a deduction for only that amount -- up to the standard $2,500.
Although Lake County taxpayers may be hurt by this in the short term, they will be able to eventually make up the deductions. That's because a new law allows all homeowners to receive an income tax break for property taxes due in 2003, regardless of when they are paid.
So, if necessary because of late billing, homeowners are allowed to deduct taxes due in 2003 and 2004 on their 2004 tax returns due in 2005.
For example, if a Lake County resident's provisional 2003 property tax bill was for $1,400, that amount could be deducted on this year's tax return. If the remaining 2003 "reconciliation" bill -- expected out in late February -- was for $800, that amount then could be deducted next year, along with next year's property taxes.
Contrary to published reports in another newspaper, the deduction amount was not bumped up to $3,500 for 2003. The maximum deduction anyone could claim on a 2004 income tax return is $5,000, amounting to a $2,500 deduction cap for each year.
Homeowners who paid escrow for property taxes to their mortgage companies cannot claim the deduction from 2003 incomes unless the mortgage company has paid the property taxes.
The Associated Press contributed to this report.
Meggen Lindsay can be reached at mlindsay@nwitimes.com or (219) 662-5339.
If homeowners have questions regarding the deduction, they may either call the Indiana Department of Revenue's Taxpayer Services Division at (317) 232 2240 or check online at http://www.in.gov/dor/.
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