How to Claim the Property Tax Deduction

If you ’ ve been an adult for, like, two seconds, you know how torment build wealth ( or paying off debt ) can be when so much of your paycheck goes to taxes. You buy groceries, you pay a tax. You buy flatulence, you pay a tax. You buy a home, yep, you pay a tax .
The good news program ? If you own a home, a car or another Uncle Sam-approved property, you can potentially knock off a hefty sum from your federal income taxes with a property tax deduction. But what precisely is “ Uncle Sam-approved ” property ? And how do you claim property taxes ? Let ’ s draw into it and find out .

What Is the Property Tax Deduction?

First things first—let ’ s spill the beans about property taxes .
When you own property—land, a house, a car—you typically have to pay property taxes to your department of state or local government every year based on the value of your property. These taxes often help fund things like schools, roads, libraries and first responders.

The property tax discount is basically the IRS ’ s way of saying, “ Hey, expect, we get it—you already paid property taxes to your city or state, so go ahead and deduct them from your federal income taxes. ”


Taxes shouldn ’ t be this complicated. Connect with a RamseyTrusted tax adviser .

Sounds nice, right ? Well, before you get excessively excited, there are some ground rules you should be mindful of when it comes to property taxes .

Limits to the Property Tax Deduction

1. The IRS caps the property tax deduction at $10,000 ($5,000 if you’re married filing separately). 1 You may think, Oh, good, I don ’ metric ton pay up that much for property taxes. But keep in mind, this limit international relations and security network ’ thymine equitable for place taxes—it includes state and local income and sales taxes besides ( otherwise known as the SALT discount ). Basically, in the eyes of the IRS, all state and local taxes are bundled together .
Congress capped the SALT tax write-off at $ 10,000 in 2017, but there ’ randomness been spill the beans of absent or increasing the limit. 2
2. You have to own the property you’re paying taxes on to claim the property tax deduction. Let ’ s say you ’ rhenium helping your parents by paying their property taxes. tied though you paid the tax, you don ’ thymine stipulate because you don ’ deoxythymidine monophosphate own the property .
3. Property taxes are deductible in the year they’re paid, not the year they’re assessed. So, if you get your place tax bill in December 2021, and you don ’ deoxythymidine monophosphate pay it until 2022, you ’ d have to wait until 2023 ( when you file your 2022 taxes ) to deduct those property taxes .
4. If you’re using an escrow account to pay property taxes, don’t deduct the amount you put in escrow. Deduct the amount of taxes you actually pay. even though you put money away in an escrow account, you ’ re not paying property taxes until your lender actually pays the tax, which could be significantly less than what you put away for the class. Your escrow besides normally includes money to pay homeowners policy, which isn ’ deoxythymidine monophosphate deductible. alone deduct what your lender pays out, which you should be able to find on form 1098.

What Property Is Deductible?

All righty, now that we ’ ve gotten the rules out of the way, let ’ s get to the fun stuff. If you pay property taxes on any of these things, you can potentially deduct them from your federal taxes :

  • Your main home
  • Vacation home
  • Land
  • Boats
  • Cars, RVs and other vehicles

What’s Not Deductible?

Aw, man—there ’ sulfur stuff we can ’ t deduce ? unfortunately, yes. here are some of the most common examples :

  • Property taxes on property you don’t own
  • Local benefit taxes for improvements such as a sidewalk, sewage system or road in your neighborhood (on the bright side, tax on the maintenance or repair of these things is deductible)
  • Renovations to your home (even if they add value to your property)
  • Payments on loans for energy-saving home improvements (yep—debt still has no benefit)
  • Taxes paid on rental or commercial property
  • Cost of utilities and services, such as gas, water, sewer and trash collection
  • Property taxes you haven’t paid yet (gasp!)
  • Taxes you pay when transferring the sale of a house

When in doubt about what you can or can ’ metric ton deduce, reach out to a tax pro !

How to Claim Property Tax Deductions

now, let ’ s get to the part we ’ ve all been waiting for—how do you claim property taxes on your federal income taxes ?

1. Be sure you’re itemizing your deductions. 

Yes, it ’ s the age-old question : Should you itemize or take the standard deduction ? If taking the standard deduction will result in a lower tax bill, don ’ triiodothyronine consume your clock time itemize and claiming property taxes. For 2021, the standard discount is $ 25,100 if you ’ re marry charge jointly. It takes a bunch of deductions to exceed the standard deduction, and that ’ s why 87 % of taxpayers use the standard subtraction rather of itemizing. 3

2. Find tax bills for your property taxes.

This international relations and security network ’ t the fourth dimension to guesstimate how much you paid in place taxes for the class. You want to be extremely accurate. If you have a home mortgage, your mortgage company should provide you with a 1098 class that states how much property tax you paid. If you cut a crack to pay your taxes directly, make sure you have the bill or a deposit statement showing how much you paid .
If you want to find out how much you paid in taxes for your cable car, you ’ ll need your vehicle registration form. You ’ ll besides need that shape if you get pulled over for going 40 miles per hour in a school zone, so don ’ deoxythymidine monophosphate lose it !

3. List your property taxes on Schedule A.

When you ’ ra itemizing your deductions, list them on Schedule A before including the entire on your 1040. Remember that your property taxes are bundled with state and local income and sales taxes, and your entire discount can ’ thyroxine be more than $ 10,000 ( or $ 5,000 if you ’ re marry and filing individually ).

When in Doubt, Contact a Tax Pro

Look, figuring out your property tax deduction can decidedly make your question whirl, specially when tax percentages vary depending on your county. If you have a relatively simple hark back and want to try filing on your own, check out Ramsey SmartTax .
If you feel like you need extra help, reach out to a tax Endorsed Local Provider (ELP)— they ’ re RamseyTrusted and will make surely you ’ re on the right way to getting your taxes done cursorily and accurately .
Find a tax pro today !

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