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.
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.
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:
Here are some of the property-related expenses that are not deductible:
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.
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.
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.
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:
Yes, you can deduct state and local property taxes you paid during the year when you file your federal income taxes.
The maximum amount of property taxes you can deduct on your federal income tax return is $10,000 if you're married, filing jointly.
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.
Homeowners can lower their taxable income through mortgage interest and property tax deductions, and may also qualify for tax credits for energy-efficient improvements.
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