Many of us may need to pay property tax every year. But in fact there is method for us to reduce the amount of this tax payment. The IRS also offers deductions for property tax, which is called the Property Tax Deduction. Since the property tax is usually applied by local government, the property tax deduction is also a type of local tax deduction. These state and local property taxes are generally eligible to be deducted from a property owner’s federal income taxes, creating the property tax deduction.
Starting with 2018, the United States Treasury Department applied the Tax Cuts and Jobs Act (TCJA), which allows the full amount of property taxes become eligible for federal tax deductions for those who itemized their deductions. In other words, we could now deduct more property tax than ever before.
Property tax includes real estate tax and tangible personal tax, and thus the deduction for property tax could also be divided into these two categories. Deductible real estate taxes include any state, local, or foreign taxes that are levied for the general public welfare. For most of the occasions, we could deduct taxes when buying or selling a home and the taxes paid to a county or town’s tax assessor on the assessed value of the personal property. And the term “personal property” refers to a taxpayer’s main home, vacation home, land, or foreign property.
However, real estate taxes do not include taxes charged for home renovations of for services like trash collection, and they usually focus only on the real estates. To understand exactly what portion of a property tax bill qualifies for deduction, you could refer to Form 1098, which is reported by the bank or lender to the IRS.
The tangible personal tax is, however, could only be deducted in an itemized way. Since tangible personal tax usually includes personal stuff such as cars and boats, the IRS usually suggest the taxpayers to deduct them in an itemized way.