Are Real Estate Taxes Deductible?

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Real estate tax deduction is one of the best benefits that a homeowner enjoys, but that does not mean you have to own a house to availing this tax exemption. There are other ways also to qualify for the same. If you have a query in mind, is real estate taxes deductible, then let’s enter into the details.

What is Deductible?

What is Deductible? - Are Real Estate Taxes Deductible?

People usually ask, are real estate taxes deductible? Some people ask differently, is property tax deductible from income tax? Here is the answer – you can deduct real estate taxes as per your payment on:

  • Primary home
  • Vacation Home
  • Land
  • Co-Operative Apartment
  • Property out of the US
  • Boats
  • Cars, RVs and Other Vehicles

You may deduct up to $10000 for a combination of the real estate tax and either local and state income tax or sales tax. In case you are married, then the deduction amount can be $5000 due to separate filing.

List of Non-Deductibles:

IRS does not allow real estate tax deductions in the following cases:

  • Real Estate Tax on the properties that you don’t own
  • More than $10000 for a combination of the real estate tax and either sales tax or local income and state tax.
  • The part of your real estate tax bill that is aimed for any kind of services like water or waste.
  • Payments on the loan that financed your energy-saving home products. Although, the home mortgage interest will be on the list of deductibles.
  • Real Estate taxes you have not paid till now
  • Homeowners Association assessment
  • Transfer taxes account of sale of any house
  • Assessment for water or sewage system or sidewalks, building streets in your neighbourhood. This is to note that the taxes for the repair or maintenance of the above items are deductible.

How to take Real Estate Tax Deduction?

How to take Real Estate Tax Deduction?

Check your Tax Record

Your local tax authority will give you a copy of the tax bill applicable for your home. Apart from that, you should also check the registration paper works of all sorts of movable assets you have like a boat, RV, car, etc. it might happen that you are paying real estate tax on those items also. However, the portion based on the value of any vehicle is to be deducted.

Include Schedule A while you file your Return

You should itemize the taxes instead of availing of the standard deduction as per the rule. It might take time to complete your itemized return but ultimately in the long run you might end up with a low amount tax bill.

Deduct the real estate tax in the year when you paid

Normally, there are two ways people used to pay real estate tax for a house. One way is to pay yearly or bi-annually or quarterly when the bill comes. The other way is to deduct an approximate amount through the escrow account. The ideal is to pay as per the bill to save your valuable time and money.

Exclude the Items that do not Count

Exclude the Items that do not Count - Are Real Estate Taxes Deductible?

You can only deduct a real estate tax if it is assessed at a similar rate for the same type of property. The entire proceedings must help the community in a broader view.

If you are curious about how to claim property tax on income tax and claim property taxes, this is the ideal place for you to get all the answers. If a question arises can you claim your property taxes on your income tax, now at least you can answer how to claim property tax on income tax?

Special Considerations:

Like any other field, here also you will find some special considerations regarding real estate tax. Any delinquent tax payment is normally treated as a part of the cost of purchasing any property. Also, a real estate owner’s tax bill normally includes several items that are normally not allowed to be deducted for tax purposes. These include fees for any kind of service delivery like trash collection, any other improvement plan for the local residential area.

Property Tax Deduction Example

If you have owned any kind of taxable property for a part of the year before you sold that, you can normally deduct the tax part from the time you owned the property. For example, if you have sold your house in August, you can deduct the real estate tax for the first 7 months of the entire year and the buyer can deduct the remaining 5 months.

Tips to have a bigger real estate tax deduction

It is a very common question, is property tax deductible from income tax? The answer must be a detailed one by giving all the ifs and buts related to property tax. In case of questions like are property taxes deductible, then apart from the answer, you must emphasize how to get a bigger deduction in case of the real estate tax. Here are those:

  1. Prepaid Property Tax – If your bi-annual bill date is next year and if you pay it early in this year, then you might be able to deduct it this year itself.
  2. Paperwork Scrutiny – If you have sold or purchased any house, check the amount you paid as property tax. You can get benefits from therein.
  3. Save Registration Statements – When you have to renew your vehicle registration, you must check whether property tax is included in it or not. You don’t know, maybe some tax deduction is waiting for your there.

Important Points on Real Estate Taxes:

  • Local, as well as State Governments, usually assess a real estate tax based on the value of any property
  • The property owner can claim for tax deduction either on all or part of the taxes paid on that property. But it has a few conditions like the property should be for personal use.
  • If tax is paid on any commercial property and on the properties that are not owned by the taxpayer, those cannot be deducted under any circumstances.

This is all about the real estate taxes and their deductible part. You must enter into depth whenever you are purchasing any such property. Do not forget you can always reach us to get a full consultation. – Reza Abbaszadeh


If you are dealing with Taxes, you also might be interested in Crypto Taxes.

About the author

Abbaszadeh Team

Mr. Abbaszadeh is the founder and CEO of Abbaszadeh Entreprises consists of 4 different companies and multiple divisions within its venture portfolio. In 2019, Reza Abbaszadeh has been awarded as The Youngest Iranian Businessman by Forbes Magazine.