How to Deduct Property Taxes From a Prior Year

You can often write off property taxes.

Every piece of real estate in the United States is subject to property taxes. These property taxes are collected by the local government and used to finance infrastructure projects for the community it serves. The amount of property taxes collected depends on the assessed value of the property. Each year, the county assessor must make a new valuation for each property in her jurisdiction. Fortunately, though, you can often deduct these taxes on your federal tax return.

Things You'll Need

• Year-end property tax statement
• IRS Form 1040

Instructions

1. Contact your local town hall or county clerk office after the 31st of January of each year. The town must retain property tax statements for all properties in the county. Ask for a year-end tax statement. This will show your total amount paid throughout the year.

2. Verify the amount paid with your previous year's records. If you have a mortgage, you may have property taxes escrowed with your homeowners insurance. You will need to collect 12 months of statements to verify the full amount paid in property taxes.

3. Fill out your Form 1040 as you normally would. Obtain a blank Schedule A (see Resources). This is the form used to deduct taxes and interest paid. This is also the form you will need to deduct your mortgage interest and points, if applicable.

4. Enter the total amount in property taxes paid for the previous year on Line 6. Complete the rest of Schedule A. This will be filed with your Form 1040.

5. Review the full tax return for accuracy with a certified public accountant. The CPA will calculate your total tax liability. Deducting real estate taxes should reduce your liability, which could mean a larger refund.

References

• Internal Revenue Service: Topic 503: Deductible Taxes
• Internal Revenue Service: Taxes
• Internal Revenue Service: Publication 530: What You Can and Cannot Deduct

Resources

• Sample Schedule A