Can I Deduct Property Tax on My Income Taxes?

If you received a big tax bill, you may also have a big deduction.

When preparing your federal taxes, keep in mind that state and local property taxes are usually deductible, as long as you itemize deductions on Schedule A. If you take a standard deduction, then property taxes are not deductible separately. Consult a professional tax advisor if you are unsure how to handle your tax situation.

Allowed Deductions

You may deduct any tax levied on your home and land by your state or other taxing authority. The taxes must be based on the taxing authority's official assessment of your home. Special assessments, such as charges for new road work or water lines in the neighborhood, are not deductible, nor are charges for local services such as trash pickup.

Itemizing

To deduct property taxes, you must use Schedule A and itemize your deductions. You enter the total deduction for real estate taxes on Line 6. You can only deduct the amount you actually paid, either directly to the tax authority or through a mortgage escrow account. Your mortgage company should provide you with a statement of the amount. If you received a refund of property taxes, you must subtract it from the amount you claim as a deduction.

Buying a Home

If you bought your home, you can only deduct the portion of the real-estate taxes that you were obligated to pay as the owner. You figure this by dividing the number of days you legally owned the property by 365, then applying that percentage to the annual tax bill. You can't deduct the entire year's taxes, even if you paid them; nor can you deduct delinquent taxes from prior years. Instead, these taxes are rolled into the selling price as the cost basis of your new property. If you are the seller of the property, you add these taxes to the purchase price.

Co-Ops and Condos

If you own a co-op apartment or a condominium, you pay a proportion of the total tax bill levied on the entire property. Your co-op or condo association should provide you with a statement declaring your proportion of the real-estate tax paid, which is generally transferred to the taxing authority through association fees that you pay.

Exceptions

While the housing market was reeling, and property values rapidly falling, the IRS allowed taxpayers who did not itemize to deduct property taxes in 2008 and 2009. The deduction was limited to $500 for those filing as single, and $1,000 for those filing joint returns, or the tax amount itself if less. This temporary deduction ended in 2010. If you missed the deduction for those years, you can still file an amended tax return.

References

• Internal Revenue Service: Topic 503: Deductible Taxes
• Intuit.com: Tax Breaks and Home Ownership
• Intuit.com: Property Tax Deduction for Taxpayers Who Don't Itemize