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Are property taxes deductible?

The IRS offers home-owners the chance to write off up to $10,000 in federal income taxes if they have also paid state or local tax on the same property.

The IRS offers home-owners the chance to write off up to $10,000 in federal income taxes if they have also paid state or local tax on the same property.

Tax season 2022 began on 24 January and the IRS has encouraged Americans to submit their filing promptly to reduce the risk of experiencing delays on their tax refunds. To boost your tax refund this year you may be able to receive a property tax deduction, allowing you to write off the cost of some state and local taxes from your federal income tax bill.

Deductions can be claimed when the state or local taxes are levied as uniform (applied at the same rate for all properties) and the tax revenues are used to benefit the community or government. Here’s how the property tax deduction works and who could be eligible…

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What is a property tax deduction?

Now it’s time to submit your returns for federal income taxes, there is an opportunity to reduce your outstanding tax bill or increase your tax refund by writing off some taxes you may have paid already.

State and local authorities levy taxes on property, which can then be used to reduce your income tax bill to the IRS. Taxes for home renovations or housing services like waste disposal cannot be included in the property tax deduction. Likewise taxes on rental, commercial, or premises not owned by the tax payer cannot be deducted.

For tax filings relating to 2018 or later the maximum deduction of all state and local taxes, including property taxes, is $5,000 for individuals or $10,000 for a married couple who file jointly.

The IRS website states: “The law limits the deduction of state and local income, sales, and property taxes to a combined, total deduction of $10,000. The amount is $5,000 for married taxpayers filing separate returns. Taxpayers cannot deduct any state and local taxes paid above this amount.”

How does the property tax deduction work?

In the United States taxes are levied by several separate by related authorities, typically on a local, state or federal level. The property tax deduction allows filers to claim a deduction on their federal tax return worth up to the value of the property taxes paid, as long as they are itemised accordingly on their filing.

To be eligible for the relief you must keep copies of your property tax statements, along with proof of payment in the form of bank statements or similar. You can claim a property tax deduction on a second or third home too, if they satisfy all mentioned criteria and you live there for at least 14 days of the year.


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