Are My Property Taxes Deductible? | What Counts, What Won’t

You can deduct state and local property taxes if you itemize, subject to the SALT limit and rules on assessments, timing, and refunds.

Property tax bills sting, so it’s fair to ask if the IRS gives anything back. Many homeowners can claim a deduction, yet it’s not automatic. It depends on whether you itemize, what the charge really is, and when the payment hit.

Below you’ll get a clear map: the rule that makes a charge deductible, the stuff that looks like tax but isn’t, the SALT cap, and a record list that keeps your return clean.

What “deductible property tax” means on a federal return

On a U.S. federal return, “property taxes” usually means state or local real estate taxes charged on the assessed value of your home or land. When the tax is levied for general public welfare and you pay it during the year, it can be an itemized deduction on Schedule A.

Two filters decide whether that line on your bill can reduce taxable income:

• You must itemize. If you take the standard deduction, property taxes won’t add extra benefit on the return.
• It must be a true tax. Charges tied to a direct benefit to your property—like a new sidewalk in front of your house—are treated differently than a general real estate tax.

Are property taxes deductible on your federal return in real life?

Yes—many homeowners can deduct them, but only when itemizing makes sense. Real estate taxes sit inside the state and local tax bucket (SALT). The IRS lays out what taxes fit and what gets limited in its guidance on deductible taxes.

Think of the deduction as a sequence: identify the qualifying tax, count only what you paid during the year, subtract refunds tied to that payment, then apply the SALT limit for your filing status.

Itemizing vs the standard deduction

Itemizing is a math check, not a personality trait. Add up your likely itemized deductions for the year: SALT, mortgage interest if you qualify, charitable gifts, and any other Schedule A categories you claim. If that total beats your standard deduction, itemizing can lower taxable income.

If it doesn’t beat the standard deduction, your property taxes may still matter for state taxes or for your own tracking, yet they won’t change the federal bill.

Cash basis timing: the “paid” rule

Most individuals deduct taxes in the year they pay them. Pay a December bill in January, and it usually lands on the January year. Prepaying next year’s bill only counts if the tax was assessed and the payment cleared during the year—plus the SALT cap still applies.

What counts as deductible property tax on a typical bill

Your statement may list multiple lines. Some are value-based real estate taxes. Others are fees or assessments. The labels vary by locality, so match the charge to the federal rule, not the county’s wording.

These charges often qualify when they’re based on value and imposed broadly in the area:

• County or city real estate tax on assessed value
• School district property tax that applies across the district
• Value-based district taxes that apply widely, not just to your parcel

Homeowners can find the IRS explanation of deductible real estate taxes and closing prorations in IRS Publication 530, “Tax Information for Homeowners”.

Charges that don’t qualify, even when they’re on the same page

A lot of bills bundle real estate tax with line items that feel “tax-ish” but won’t fit on Schedule A as real estate tax. Common non-deductible charges include:

• Assessments for local benefits. Sidewalks, sewer lines, water mains, and similar projects tied to your parcel are treated as improvements, not a yearly deduction.
• Fees for services. Trash pickup fees, water usage charges, HOA fees, late fees, and interest on a past-due bill aren’t deductible as property tax.
• Transfer taxes at closing. These are usually part of buying or selling costs, not a deductible real estate tax.

Some improvement assessments can be added to the property’s cost basis, which can matter later at sale time. That’s a separate move from a yearly deduction.

How the SALT limit can cap your deduction

Real estate taxes are combined with other state and local taxes. You can generally deduct either state and local income tax or general sales tax, plus real estate taxes and certain personal property taxes, then apply the overall SALT limit.

For the IRS definition of which taxes count in this bucket, see IRS Topic No. 503, “Deductible Taxes”.

The IRS posts the current-year cap and the worksheet steps in the Instructions for Schedule A (Form 1040). Use the year that matches your return, since the cap can change by law and by filing status.

Even if your property tax alone is high, the cap can still stop you from deducting the full amount once other state and local taxes are added in.

Table: Common property tax charges and their federal treatment

Charge on your statement	Deductible on Schedule A?	What to do with it
County or city real estate tax based on assessed value	Yes, if you itemize and within SALT limit	Track as real estate tax paid
School district property tax applied across the district	Yes, under the same rules	Include with real estate taxes you paid
Personal property tax on a vehicle based on value	Often yes, as personal property tax	Keep the bill showing value-based tax
Flat fee for trash pickup	No	Treat as a service fee
Assessment for sidewalk or sewer improvement tied to your parcel	No	May add to basis; keep records
Late fee or interest for paying the bill late	No	Not a tax; don’t claim it
Escrowed property tax paid by your lender to the county	Yes, for the amount paid that year	Use escrow history plus county receipt
Refund or rebate after an assessment appeal	Reduces your deductible amount	Subtract it from taxes paid
Transfer tax or recording fee at purchase	No	Part of purchase costs; keep for basis

Escrow accounts: why your lender’s numbers matter

If you pay property taxes through a mortgage escrow, you might never pay the county directly. Your lender collects escrow with your mortgage payment, then pays the tax bill when due. For your return, the deductible amount is what was paid to the taxing authority during the year, not the amount collected into escrow.

Many lenders show real estate taxes paid on Form 1098 or on a year-end escrow statement. If you can also download a county receipt, keep both. If those numbers differ, the amount actually remitted during the year is the number that matches the deduction rule.

Closing prorations when you buy or sell

At purchase or sale, property taxes are often prorated. Part of the year’s tax is allocated to the buyer and part to the seller. Closing papers usually show the split, and each party can deduct their own share if each itemizes and paid that share.

Refunds and credits: how to avoid double counting

Counties issue refunds after successful assessment appeals, exemptions, or clerical fixes. They also apply credits against later bills. When you get money back, you can’t keep the full deduction as if you never received it.

Two patterns keep this simple:

• Refund in the same year you paid. Subtract the refund from the taxes you claim for that year.
• Refund in a later year. Part of the refund can be income, depending on whether the earlier itemized deduction lowered your tax. The IRS explains this “tax benefit” rule under itemized deduction recoveries in Publication 525.

A small habit helps: keep a running note of real estate tax paid, then list any refunds or credits tied to those payments.

Table: A checklist to claim the deduction cleanly

Step	What you’re checking	What to save
1	You plan to itemize on Schedule A	A draft total of itemized deductions vs standard deduction
2	The charge is value-based and imposed broadly	County bill showing the tax line items
3	Local benefit assessments are kept out	Bill detail or municipal breakdown
4	You’re using the amount paid during the year	Bank proof of payment, or escrow statement
5	Refunds or credits are subtracted from taxes paid	Refund notice, credit memo, or revised bill
6	The SALT total fits within the cap for your filing status	Your Schedule A worksheet notes

Special situations that change the deduction path

Some households won’t claim the real estate tax on Schedule A, even when the bill looks the same. The use of the property matters.

Rental property and mixed-use homes

If you rent out a property, real estate taxes tied to that rental are generally handled as a rental expense on Schedule E, not as a personal itemized deduction. If you rent out part of your home, you may split the tax between personal and rental use with a reasonable method, then keep a short worksheet that matches your split.

Second homes, condos, and co-ops

A second home can still generate deductible real estate taxes if you itemize and the taxes meet the normal rules. Condo owners often pay taxes directly or through a pass-through statement. Co-op owners may get a yearly letter showing their share of building taxes paid; keep that letter as your proof.

Recordkeeping that keeps you out of trouble

You don’t need a complex system. You need proof that the charge is a real estate tax and proof that you paid it in the year you’re claiming.

• The full property tax bill showing line items
• Proof of payment (bank record, online confirmation, or escrow statement)
• Any refund or credit notice tied to the same payment
• If shared ownership: a note showing who paid what

Common mistakes that lead to IRS notices

Most problems come from mixing up what you paid with what you were billed, or treating fees like taxes. Watch for these snags:

• Claiming escrow collected instead of the amount paid to the county
• Including sidewalk, sewer, or street assessments as if they were general taxes
• Forgetting to subtract a refund or credit
• Claiming someone else’s payment without proof you paid your share
• Using a tax year that doesn’t match when the payment cleared

Get the numbers right, save the documents, and the deduction usually holds up.