Deduction for Property Taxes

• Property taxes paid on your home may create a federal tax deduction. The amount of property taxes you pay are deductible on Schedule A of Form 1040 if you choose to itemize your tax deductions instead of using the standard deduction. The good news is that unlike mortgage interest, you can deduct property taxes on multiple properties even if these properties do not qualify as your primary residence.
  
  

Only Certain Property Taxes Qualify

• To be deductible, property taxes must be based on an assessment of the residence or property you own. An assessment is a valuation of your residence for property tax purposes and an assessment is generally prepared by a local city or county assessor. The property tax must be applied uniformally throughout your taxing jurisdiction to be deductible. Special assessments, or local benefit taxes, for items such as new sidewalks or sewers do not generally qualify for the federal tax deduction.
  
  

Qualifying Time Period

• Only property taxes from a qualifying time period are deductible for federal tax purposes. You must owe the taxes for a period during which you were actually the owner. For example, assume Tricia buys a house on June 1. On June 1, Tricia goes through a formal closing process where the seller signs over to Tricia the title to the house. As part of the closing process, Tricia is required to pay all taxes for the current calendar year. Tricia can deduct only the taxes paid from June 1 to December 31. The seller can deduct the property taxes due from January 1 until May 31.
  
  

Property Taxes Paid to a Seller

• If you pay property taxes to a seller to cover the taxes due for a time period in which the seller owned the property, you cannot deduct the property taxes for that time period which the seller owned the home. However, the property taxes you paid may increase the your cost basis in the home if the taxes are not deductible. The cost basis of a home is used to determine the amount of capital gain or loss you realize when selling your home. Therefore, you should keep track of all closing expenses at the time you purchase a home, including the property taxes you pay to the seller.