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Property Tax Deduction Frequently Asked Questions

The more experienced taxpayers take advantage of property tax deductions as one of the biggest deductibles from federal income taxes. However, given its complicated and tedious nature, a lot of people do not bother with it at all. Read on for all you need to know about property tax deduction.

5 Frequently Asked Questions About Property Tax Deduction

What Is Property Tax?

Property tax is a kind of tax imposed by the government on a real estate property and paid by its owner on an annual basis. Think of property tax as a form of “rent” you pay for living in a country and enjoying its benefits. Local governments usually allot this tax to fund improvements in the community such as sidewalk repairs and garbage collection.

Property tax is somewhat considered an ad valorem tax. This means that the amount the government charges is approximately based on the value of the transaction or the property.

Appraisers assess the value of the property based on fair market value. The government then charges taxes in proportion with the property’s appraised value.

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The government imposes property tax solely on real property i.e. those that are immovable. These include land, structures, and other fixed buildings within the property. However, they do not include personal property like furniture and appliances.

A lot of taxpayers ask how to calculate property taxes since they vary in different states. This property tax calculator should help you calculate.

What Is Property Tax Deduction?

Property tax deduction is one of the benefits of owning real estate property.

Since property tax is an allowed deductible, it lets a taxpayer who legally owns properties claim deductions on their federal income taxes. These properties may include his primary home, vacation home, and land.

However, there are certain property taxes a homeowner cannot deduct. Delinquent property taxes paid by a property’s buyer on the seller’s behalf is an example. Most of the time, the seller deducts these from the actual price of the home. The buyer, on the other hand, cannot deduct them from his federal income tax.

Who Can Claim Property Tax Deduction?

man signing contract | Property Tax Deduction Frequently Asked Questions | How to calculate property tax
Generally, only taxpayers who meet the following criteria can claim a property tax deduction:

  • They are the legal owner of a certain property.

This means that in order for a taxpayer to claim a property tax deduction, their name must appear on the title or the deed of the property.

That is the reason why a taxpayer cannot claim deductions for taxes on properties that he or she does not own.
Examples of these are property taxes that owners of an apartment pay. The owners can claim deductions for the property taxes they paid. On the other hand, the tenants or occupants of the apartment cannot claim a property tax deduction since they are not the legal owners of the said apartment.

  • They are eligible to itemize their tax deductions.

A taxpayer is technically considered eligible to itemize their tax deductions if the sum of all itemized expenses is larger than the allowed standard deduction in a year.

Itemized expenses include personal property taxes, interest on mortgages of $750,000 or less, mortgage insurance premiums, medical and dental expenses, home office expenses, investment interest, charitable donations, gambling losses, state and local sales tax (SALT), and tax preparation fees.

However, there are certain exempted situations regarding legal ownership through the so-called “equitable ownership.”

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An example of this is an adult who is helping his parents pay property tax. Generally, that person cannot claim a property tax deduction if his name is not on the deed of the property.

However, if he could produce proof that he will eventually be given ownership of the property in the future, then it may be possible to claim equitable ownership. Without hard proof such as a written contract, however, the Internal Revenue Service (IRS) will not recognize this claim.

How Is Property Tax Deduction Calculated?

As mentioned, a taxpayer can claim a property tax deduction if he is eligible to itemize his deductibles. This means that if he decides to itemize his deductibles, the sum of it would be greater than the allowed standard deduction in a given year.

Property tax deduction is simply the amount of property tax that a homeowner paid for that year. It is only one among a list of items that taxpayers can list as deductibles.

Itemizing deductibles can be a tedious process. It involves the manually listing of deductible items on Schedule A of Form 1040. Additionally, you would have to make sure to properly keep all of your receipts for those expenses as the IRS may request them. Other proofs of expenses include bank statements, bills, and tax receipts.

Though a little more complicated, itemizing deductions can be of great financial help if done correctly.

Is There a Limit on Property Tax Deduction?

In the old tax code, there was no limit on property tax deductions. However, starting in 2018, the government has greatly changed tax deductions on property and income taxes.

Perhaps those who are most affected by these changes are the ones who pay high property taxes. Previously, those who owned expensive or multiple homes were able to deduct all taxes paid for those properties. Now, under the new law, the government has imposed a combined tax deduction limit of $10,000 on property and income taxes.

Additionally, taxes paid on real estate properties in other countries used to be deductible. Under the new law, taxpayers can no longer deduct them at all.


Taxpayers often shrug their shoulders at these tax deductions. Finance-savvy taxpayers, on the other hand, take full advantage of them. Armed with the right knowledge, property tax deduction could be the biggest deductible you may have been missing. If you want to save more, it is essential to learn as much as you can about it.

Do you have any more questions about property tax deduction? Ask us in the comments section below!

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