Are property taxes deductible?

Every homeowner must pay property taxes, and some areas have heftier taxes than others.  They can feel like a significant financial burden, but come tax season, you can write off a portion of what you paid in property taxes to lower your taxable income and potential tax liability.

Property taxes are one of a few different tax deductions available to homeowners, and they are part of the SALT deduction, meaning property taxes, state and local income taxes, and sales taxes are all capped at $10,000 in total.

Can you deduct property taxes?

As a homeowner, you may write off state and local property taxes from your federal income taxes. You can write off both your annual property taxes on the assessed value of your house as well as the taxes you paid at closing during the sale or purchase of a property.

Under current tax law, you may deduct up to $10,000 ($5,000 if single or married and filing separately) of property taxes, and either state and local income taxes or sales taxes.

What property is tax-deductible?

Not all types of property will qualify for a tax deduction. Generally, you can deduct property taxes on the following kinds of real estate and even personal property:

• Primary home
• Co-op apartment (with special rules outline in IRS publication 530)
• Vacation (second) home
• Land
• Property outside the US
• Cars, RVs, and other vehicles
• Boats

What doesn't count as property tax?

Here are some of the property-related expenses that are not deductible:

• Taxes paid on a property you don’t own
• Taxes paid on a commercial or rental property
• Unpaid taxes
• Transfer taxes on a home sale
• Taxes on home renovation costs
• Cost assessments for building streets, sidewalks, or water and sewer systems locally
• Taxes on local services and utilities, like trash collection or water
• Homeowners association fees
• Any combination of property taxes, and either state and local income taxes or sale taxes, in excess of $10,000 (or $5,000 if single or married filing separately)

How do property tax deductions work?

The money you paid towards property taxes can be deducted on your federal income return. That means if you paid $5,000 in property taxes and your taxable income was $80,000, your new taxable income becomes $75,000. 

However, the deduction only works if you’re itemizing, instead of taking the standard deduction ($25,900 for married couples and $12,950 for single filers for 2022 taxes; this rises to $27,700 for couples filing together or $13,850 for singles for tax year 2023). 

Since the total amount of property taxes you can write off ($10,000) is only a fraction standard deduction when you’re married, you’ll need to itemize many more eligible expenses besides property taxes to justify claiming this deduction. However, the costs of homeownership are large and many of them tend to be deductible expenses (like mortgage interest), so if you own a house and have a mortgage chances are you can benefit from itemizing anyway.

If it’s unclear whether you claim the standard deduction or itemize when you file, speak with an accountant or tax professional who can speak better to your situation.  

How to claim the property tax deduction

Property tax deductions could save you a significant amount of money, so long as you know how much you can claim. If you’ve done the math and determined that all of your itemized expenses are greater than the standard deduction, here’s how to take the deduction.

1. Itemize your property taxes: Find your tax records by contacting your local taxing authority. They’ll give you a copy of the tax bill for your home. Also look at the registration paperwork on cars, RVs, boats, or other movable assets as you may pay property taxes on them, too. 
2. Exclude taxes that don’t count: You may only deduct property taxes that are assessed uniformly at a similar rate for similar property in your area. We’ve outlined what is and isn’t deductible above.
3. Itemize your deduction on Schedule A: Use Schedule A to itemize all of your deductions, including property taxes.
4. Deduct your property taxes in the year that you pay them: People pay property taxes on a home in one of two ways. Either they write a check once or twice a year when the bill arrives, or they pay their taxes into an escrow account as part of their monthly mortgage payment. Sometimes, people make a mistake when they attempt to deduct taxes by including tax payments made in the wrong year. Remember, even if you pay your property taxes as part of your mortgage, you can only deduct them after your mortgage lender or servicer has paid the county.

If you bought or sold your house this year, you can usually deduct taxes paid when you owned the property. For instance, if you sold a house in July, you could deduct property taxes paid from January to June.

How to get a bigger property tax deduction

If you’re itemizing your deductions and aren’t sure you’ll reach the allowable deduction cap, there are a few things you can do to get to the maximum amount:

• Prepay your property taxes: Say your semiannual tax bill comes due in July 2024. If you pay it in December 2023, you could deduct it in 2023 rather than 2024.
• Save your registration statements: Whenever you renew your registration on a vehicle, check if any part of the registration fee qualifies as a property tax. You could get some more tax savings there.
• Review your closing paperwork: After buying or selling a house, look at the property taxes you paid at closing. You might have forgotten about them or overlooked them before.
• Claim the homestead exemption: Certain states have this real estate tax exemption that shields a portion of your home's value from property taxes. You may need to have a certain income to qualify, and if you do you'll lower the total amount of property tax you pay. 

Property tax deduction FAQs

Can you deduct state and local property taxes?

Yes, you can deduct state and local property taxes you paid during the year when you file your federal income taxes.

How much property tax can you deduct?

The maximum amount of property taxes you can deduct on your federal income tax return  is $10,000 if you're married, filing jointly.

Who is eligible for a property tax deduction?

You can only deduct property taxes and benefit from it if you have more than $12,950 worth of itemized deductions as a single filer. You cannot take the standard deduction.

What are the tax benefits of owning a house?

Homeowners can lower their taxable income through mortgage interest and property tax deductions, and may also qualify for tax credits for energy-efficient improvements.