Property tax bills can be deductible. Find your tax records, add up the stuff that counts, and watch the calendar.
The property tax deduction is one of many benefits of being a homeowner, but you don’t need to own a house to get this tax break — there are other ways to qualify.
Are property taxes deductible?
Generally, yes. The SALT deduction allows you to deduct up to $10,000 ($5,000 if married filing separately) for a combination of property taxes and either state and local income taxes or sales taxes. Renters might qualify for a property tax deduction, or a property tax credit, on their state taxes.
What property is tax deductible?
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Primary home.
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Co-op apartment (see IRS publication 530 for special rules). [1]
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Vacation homes.
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Land.
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Property outside the United States.
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Cars, RVs, and other vehicles.
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Boats.
» MORE: Want to know what property tax actually is and how it’s calculated? Check out our property tax primer.
What doesn’t count as a property tax deduction
The IRS doesn’t allow property tax deductions for:
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Property taxes on property you don’t own.
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Property taxes you haven’t paid yet.
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Assessments for building streets, sidewalks, or water and sewer systems in your neighborhood. (Assessments or taxes for maintenance or repair of those things are deductible, though.)
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The portion of your tax bill that’s actually for services — water or trash, for example.
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Transfer taxes on the sale of a house.
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Homeowners association assessments.
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More than $10,000 ($5,000 if married filing separately) for a combination of property taxes and either state and local income taxes or sales taxes. [2]
How to take the property tax deduction
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Find your tax records. Your local taxing authority can give you a copy of the tax bill for your home. Your paid property tax amount may also be included in a mortgage statement from the beginning of the year. But you should also scrutinize the registration paperwork on your car, RV, boat, or other movable assets. You might be paying property taxes on those, too, and the portion based on the value of the vehicle is probably deductible.
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Exclude the stuff that doesn’t count. You can deduct a property tax only if it’s assessed uniformly at a similar rate for similar property in the community. The proceeds have to help the community, not pay for a special privilege or service for you. Sometimes counties make assessments for improvements. Those may not be deductible if they are not a tax.
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Use Schedule A when you file your return. That’s where you figure your deduction. Note: This means you’ll need to itemize your taxes instead of taking the standard deduction. It’ll probably take more time to do your taxes if you itemize, but you could end up with a lower tax bill. Still, you’ll want to look at where you stand with the standard deduction to see if it’s worth it for you. For the 2022 tax year, the standard deduction ranges from $12,950 to $25,900 for joint filers.
- Deduct your property taxes in the year you pay them. Sounds simple, but it can be tricky. There are two ways people typically pay property taxes for a house: They write a check once or twice a year when the bill comes, or they set aside money each month in an escrow account when they pay the mortgage. Don’t let the second method fool you — deduct only the taxes actually paid during the year.
Source: nerdwallet.com ~ By Tina Orem ~ Image: Canva Pro
