We might want to claim a property tax deduction if we own some homes and lands. However, we might don’t know the exact process of claiming a property tax deduction, nor do we know its benefits and drawbacks. This article intends to discuss this topic.
If you want to claim a property tax deduction, the tax must only apply to the value of the personal property owned and be charged on an annual basis, irrespective of when the government collects it from you. That is, if the state tax was only charged at the time the property was purchased, (it did not charge you for the second time), then this tax does not meet the IRS definition of a deductible personal property tax.
Also, if you want to claim a property tax deduction, you need to choose the itemized deduction option. Therefore, it’s necessary to consider whether or not your deduction amount is greater if you choose the itemized deduction in a given tax year.
Since we need to choose itemized deduction option if we want to claim a property tax deduction, the pros and cons of the property tax deduction is similar to the benefits and the drawbacks of itemized deduction. However, it’s usually worth to claim a property tax deduction, because the deduction discriminates against renters and encourages people to take on more debts. In other words, the nature of property tax deduction is in fact promotes homeownership, because the property tax deduction usually could save you a large amount of money. However, the tax reform in 2018 doubled the amount of standard deduction, and some people might therefore choose the standard deduction instead of itemized deduction. Thus, it’s very important to calculate the total amount of tax that you could save in both standard deduction and the itemized deduction method before deciding an option.