How Much Does Property Tax Affect Filing Your Taxes?

Save

Taxpayers who own property are assessed a tax annually on the value of that property. These taxes are paid either out-of-pocket or through escrow as part of a mortgage loan. While these expenses may be an unpleasant requirement, they may be advantageous at tax time. Some property tax payments may help to lower an individual's income tax liability.

Personal Property Tax

  • Tax assessors calculate personal property tax based on the current value of owned property. This tax applies to vehicles such as cars or boats and is paid annually. A common form of personal property tax is ad valorem tax, which is added to the cost of tag renewal in most U.S. states. Ad valorem tax decreases over time as the asset's value depreciates. Personal property tax is a tax-deductible expense for individuals who choose to use itemized deductions instead of the standard deduction for their filing status.

Residential Property Tax

  • Individuals who own real estate pay residential real estate tax on the assessed value of their property each year. Many taxpayers pay some of this total each month along with their mortgage payment and mortgage insurance. These amounts are placed in an escrow account, which is used by the mortgage company to pay the annual real estate tax. Like personal property tax, real estate taxes are also tax-deductible as an itemized deduction.

Rental Property Tax

  • Property owners who rent homes or offices to others are also required to pay property taxes on these assets. Since the income from rental property must be reported to the Internal Revenue Service, taxpayers can deduct the amount of their real estate taxes for these properties, along with other expenses, against the total rental income they received. This deduction helps to reduce the amount of taxable rental income for that tax year.

Reporting Property Tax Payments

  • Taxpayers report personal property taxes and residential real estate taxes on Schedule A along with their other itemized deductions. These deductions can only be claimed if the total of all the itemized deductions exceeds the amount of the standard deduction for the taxpayer's filing status. Real estate taxes paid on rental property are reported on Schedule E "Supplemental Income and Loss" as deductions from rental income.

References

Promoted By Zergnet

Comments

Resources

Related Searches

M
Is DIY in your DNA? Become part of our maker community.
Submit Your Work!