INDIANAPOLIS -- Homeowners who take the standard deduction on their federal income tax returns will get an extra cut when they file next year when President Bush signs the housing legislation Congress passed last week.

The bill contains a provision pushed by U.S. Rep. Baron Hill, D-9th District, and Sen. Evan Bayh, D-Ind., that creates a new, temporary property-tax deduction aimed specifically at homeowners who don't itemize on their returns.

It could help more than 900,000 households in Indiana and 30 million nationwide.

"I have heard from so many folks in Southern Indiana about the burden they are shouldering due to high property taxes," Hill said in a statement. "And although this is primarily a state legislature issue, I wanted to find some way relief could be provided at the federal level."

Already, federal law allows people who itemize their tax deductions to subtract what they pay in property taxes from their income. That reduces their ultimate tax liability.

But homeowners who claim the standard deduction on their income tax returns can't get the property-tax deduction because the standard deduction is meant to cover property taxes and other commonly claimed deductions.

Under the housing bill passed by Congress, however, homeowners who don't itemize would get a new property-tax deduction worth up to $500 for single filers and up to $1,000 for joint filers. It would come on top of the standard deduction.

A typical nonitemizing Hoosier family that makes between $65,100 and $131,450 will pay about $250 less in taxes for this year under the new deduction, according to the joint statement released by Hill and Bayh.

"These are tough economic times for many Hoosier families coping with declining home values, rising property taxes, and astronomical prices at the pump," Bayh said in a statement.

"Even though Washington is broken, here is a case where we fought through the gridlock, rose above election-year politics, and got Democrats and Republicans to work together to help ease the strain on family budgets in the midst of the housing crisis," he said.

But the legislation authorizes the new deduction for only one year.

Bayh's spokesman, Eric Kleiman, said the senator intends to work next year to make the deduction permanent.

"The goal is to make this a permanent deduction for nonitemizers, and this is a huge step forward in realizing that goal," Kleiman said. "Getting this added to the short (standard deduction income tax) form crosses a major threshold in making this permanent relief."

Bayh and Hill have been working on the property-tax issue for months. An earlier version of the legislation would have limited it to residents in taxing districts where property-tax rates did not increase. But Hill's spokeswoman, Katie Moreau, said that was not included in the final version of the legislation.

The property-tax provision is included in the Foreclosure Prevention Act of 2008, which is meant to help 400,000 homeowners avoid foreclosure and prevent the collapse of mortgage giants Fannie Mae and Freddie Mac. It also includes $3.9 billion in grants for neighborhoods hurt by foreclosures.

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