Can a Short Form Filer Deduct Property Taxes?

When you pay state or local property tax, you often become eligible for a tax deduction on the federal return — but only if you use itemized deductions.

Saving money while preparing your tax return is often about knowing the tax deductions available to you and making sure to claim them. In many cases, it's tempting to use the short form income tax return — known as Form 1040-EZ — because it's easier to understand and quicker to complete. But in some cases this may result in the inability to claim certain deductions that can increase your tax savings or help maximize your tax refund.

Property Tax Deductions

In most cases, the Internal Revenue Service (IRS) allows income tax filers to deduct property taxes they paid at the state or local level. According to the IRS, property taxes that are considered deductible are "generally any state, local, or foreign taxes on real property." There are some exceptions to this rule. For example, property taxes must be uniform for every taxpayer in the taxation district — such as a county or school district, for example — and they must be based on the property's value.

Income Tax Short Form

The ability to deduct property taxes depends on which forms the filer decides to use to report his or her income. The IRS provides filers the short form income tax return to simplify the reporting process. But the short form does not allow filers to attach a schedule of itemized deductions, which is necessary to claim a specific property tax deduction. Filers still can get a refund from the short form by claiming the standard deduction, though, which sometimes provides more tax savings than itemizing.

Schedule A and Itemized Deductions

To claim property taxes as a deduction, the IRS instructs filers to use Schedule A, Itemized Deductions, to Form 1040. On this form, the taxpayer can enter the amount he paid in real estate property taxes on line 6. Taxpayers may also claim a deduction on any other property taxes they paid — for example, a boat or recreational vehicle property tax — but only if the taxes were based on the property's assessed value. Property taxes not related to real estate are reported on line 8 of Schedule A.

Considerations

It is not always necessary for taxpayers to itemize and claim the property tax deduction. In some cases, it's possible to save more money from simply claiming the standard deduction, which is available on the short form return. The best way to determine this is actually to run the numbers. If the total property taxes for the year do not exceed the standard deduction — $5,700 for single filers, as of 2010, and $11,400 for joint filers — then it might save time and money to use the short form. It is important to note, though, that itemizing might still be a better choice if there are other substantial deductions, such as charitable donations or mortgage expense.

References

• Internal Revenue Service; Tax Topics--Deductible Taxes; Sept. 23, 2011
• Internal Revenue Service; Form 1040EZ Instructions; 2010
• TurboTax; Tax Deduction Wisdom — Should You Itemize?; 2010
• Internal Revenue Service; Instructions for Schedule A; 2010

Resources

• Internal Revenue Service; Form 1040 Schedule A--Itemized Deductions; 2010
• Internal Revenue Service; Publication 535 Business Expenses--Taxes; 2010