Property taxes for your residential property can be quite a burden, but the good news is there’s a way to ease some of the weight. You can benefit from the property tax deduction from your federal income tax bill.
Let’s dig deeper and find out what’s deductible, what’s not deductible, and how you can approach your property tax deduction.
What’s Deductible and what’s not Deductible?
You could be able to deduct property taxes you pay on some items. These include:
- Primary home
- Land
- Vacation homes
- Boats
- Property outside the U.S.
- RVs, cars and other vehicles
On the other hand, the IRS does not accept property tax deductions on items such as:
- Property you do not own
- Homeowner association assessments
- Property taxes that have not paid yet
- Transfer taxes upon selling a house
- Assessment for building sewer and water systems, sidewalks or streets in your neighborhood. (Taxes or assessment for repair and maintenance for these things are, however, deductible).
How to Approach your Property Tax Deduction
Find all your tax records. First, collect all your tax records. This includes registration on your boat, RV, car, and other movable assets. If you don’t have them, your local taxing authority may offer you a copy of your tax bill.
Exclude everything that doesn’t count: A property tax deduction is only possible when it is assessed uniformly at the same rate for the same property in your community. However, the proceeds have to benefit the community instead of paying for a service or special privilege.
Itemize your taxes: This is the point where you figure out your property tax deductions. Itemize your taxes accordingly. Although this could take a lot of time to do all your taxes, it could lower your tax bill considerably.
How do you pay your property tax? If you approach it by depositing dollars into an escrow every month together with your mortgage payment, don’t treat it as a property tax deduction. Generally, the IRS qualifies only the amount forwarded by your lender or bank for deduction.
Approaching property tax deductibles may seem simple from paper, but they are quite tricky. If you need help determining what qualifies and what doesn’t, as well as how to approach the whole thing, Five Stone Tax Advisers is here to help you. We offer expert tax representation – from property tax reduction to tax preparation and planning to all IRS concerns.
Five Stone was able to reduce the inflated appraisal on our property by over $40,000 resulting in a significant property tax reduction. –Patricia C.
