Paying property taxes is one of many costs associated with homeownership. However, these local levies can actually be a tax help when you deduct them from your federal return.
For your property taxes to be deductible, they must be uniformly charged against all property in your area and they must be based on the assessed value of your home. Your property taxes will most likely be placed into an escrow account by your mortgage lender, to make sure that the funds to pay them are available. The amount of the property tax will be on the statement you get from your lender, and you should be able to deduct it for tax help every year that you pay it.
During the year the home was first transferred to you, both you and the seller paid the property taxes. Don’t forget to deduct the amount you paid for those taxes as well, for additional tax help.
In any given year, you can only deduct the amount of taxes there were paid to the government from the escrow account. If you paid any portion of the following year’s taxes up-front into the escrow account, those will not be deductible for tax help until the following year.
You do not have to itemize your deductions in order to deduct your property taxes. If you are single, you are allowed up to $5,700 as a standard deduction, $500 of which can be your property taxes. If you are married, you are allowed up to $11,400 as a standard deduction, and your property taxes can be up to $1,000 of that amount.
Keep in mind that your city or county may charge you in “benefit taxes” for improvements to local sidewalks, roads, and sewer systems. In general, you will not receive any tax help for these taxes because they cannot be deducted. However, if the local benefit taxes are imposed in order to maintain or repair your home, you can deduct them for property tax help. You may also be able to deduct the interest that you pay on them.
Although you may only deduct mortgage interest on up to two homes, you may deduct the property taxes you pay on any number of homes. This will provide extra tax help for those who can afford multiple properties. If you rent out a second or third home for more days during the year than you live in it, make sure that you use it for at least 14 days a year ― that will allow you to get tax help by listing it as a personal residence for the purposes of deducting property tax.