Property taxes can be a major expense for homeowners, but they can also be tax deductible. If you itemize your deductions on your tax return, you can deduct the property taxes you pay on your primary residence and any other real estate you own. Below is a TikTok where I dive deeper into my own experience as a homeowner in California.
How to itemize your deductions
To itemize your deductions, you need to file Form 1040 Schedule A. This form lists all of the itemized deductions that you can claim. To claim the property tax deduction, you will need to enter the amount of property taxes you paid on your Schedule A.
What property taxes are deductible?
To be deductible, property taxes must be:
- Assessed on the value of real property.
- Levied for the general public welfare.
- Uniform throughout the jurisdiction at a like rate.
This means that you can deduct property taxes you pay on your home, land, and any other real estate you own. You can also deduct property taxes you pay on rental property.
What property taxes are not deductible?
Some property taxes are not deductible, such as:
- Local benefit taxes: These taxes are assessed to pay for specific improvements to your property, such as sidewalks or sewers.
- Special assessments: These taxes are assessed to pay for specific services provided to your property, such as trash collection or mosquito control.
- Property taxes paid in escrow: If your mortgage company pays your property taxes for you, you cannot deduct them on your tax return.
How much property tax can I deduct?
The amount of property tax you can deduct is limited to the total amount of state and local taxes you can deduct. This limit is $10,000 for individuals and married couples filing jointly. If your state and local taxes exceed $10,000, you can only deduct the first $10,000.
How to claim the property tax deduction
To claim the property tax deduction, you will need to enter the amount of property taxes you paid on your Schedule A. You can find this information on your property tax bill.
Tips for maximizing the property tax deduction
There are a few things you can do to maximize the property tax deduction:
- Itemize your deductions: If you itemize your deductions, you can deduct the full amount of your property taxes.
- Claim all of the property tax exemptions and deductions that you are eligible for: There are a number of property tax exemptions and deductions available to homeowners. Be sure to claim all of the ones that you are eligible for.
- Protest your property tax assessment if you believe that it is too high: If you believe that your property tax assessment is too high, you can protest it with the local government.
Conclusion
Property taxes can be a major expense for homeowners, but they can also be tax deductible. By itemizing your deductions and claiming all of the property tax exemptions and deductions that you are eligible for, you can save money on your annual tax bill.
Disclaimer: This is not official legal tax advice and I am not a CPA.
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