What Amount Can You Deduct on Property Taxes With the IRS
- Property taxes fall under state and local tax laws -- the federal government rarely imposes property taxes -- and as a homeowner you will typically pay them to the county you live in. The Internal Revenue Service (IRS), however, does allow you to deduct property taxes when filing federal taxes. This deduction is for the full amount of property taxes that you pay, no matter how much it may be (most property taxes do not rise above several thousand dollars a year). There are a number of requirements and caveats for this deduction.
- The property taxes that you pay must meet certain requirements before you can deduct them. They must be applied to all property in your jurisdiction equally, and they must be based on an assessed value report. Also, you can only deduct the full amount of your property taxes if you use the itemized deduction option when filing. The alternative general deduction method (used if there is no reliable record of all deductible expenses) has a limit of $500 for singles and $1,000 for married couples.
- Not all property taxes can be deducted even if you meet the requirements. If your state or county imposes taxes that are designed for some type of improvement, you cannot deduct these taxes. This occurs when a government creates a tax to improve or build sewers, roads, sidewalks and similar public structures nearby. These improvements actually raise the value of your property, and the IRS does not consider them deductible.
- Other exceptions also exist. Commercial properties, for instance, do not fall under the same regulations and may not have the same applicable laws. Foreign real estate taxes are not deductible at all if you do not take the itemized deduction option when filing. Itemized charges, such as fees for garbage and water, cannot be deducted. These are not taxes based on the value of your home, so they do not fall in the same category as property taxes and deductions are not given.