Real Estate Taxes - Property Taxes

All real estate taxes (aka property taxes) are fully deductible on the appropriate schedule (A, C, F or E). There is not a limitation as there is with mortgage interest. All property taxes can be deducted as long as they fit the below criteria as outlined in IRS Topic 503 - Deductible Taxes:

To be deductible, the tax must be imposed on you and must have been paid during your tax year. Deductible real estate taxes are generally any state, local, or foreign taxes on real property. They must be charged uniformly against all property in the jurisdiction and must be based on the assessed value.

Note: This would include vacant or bare land.

Many states and counties also impose local benefit taxes for improvements to property, such as assessments for streets, sidewalks, and sewer lines. These taxes cannot be deducted. However, you can increase the cost basis of your property by the amount of the assessment. Refer to IRS Publication 551 Basis of Assets for more information. Local benefits taxes are deductible if they are for maintenance or repair, or interest charges related to those benefits.

If a portion of your monthly mortgage payment goes into an escrow account, and periodically the lender pays your real estate taxes out of the account to the local government, do not deduct the amount paid into the escrow account. Only deduct the amount actually paid out of the escrow account during the year to the taxing authority.

To enter your deductible real estate taxes into the TaxAct® program:

  1. From within your TaxAct return (Online or Desktop), click on Federal. On smaller devices, click the menu icon in the upper left-hand corner, then select Federal.
  2. Click Itemized or Standard Deductions in the Federal Quick Q&A Topics menu to expand the category and then click Taxes Paid
  3. Click Continue on the screen Itemized Deductions - State and Local Taxes, and then click No to reach the screen Itemized Deductions - Real Estate Taxes Paid
  4. Enter the qualified amount of real estate taxes you paid during the tax year.

Additional Information

You cannot include:

  • Foreign taxes you paid on real estate.
  • Itemized charges for services to specific property or persons (for example, a $20 monthly charge per house for trash collection, a $5 charge for every 1,000 gallons of water consumed, or a flat charge for mowing a lawn that had grown higher than permitted under a local ordinance).
  • Charges for improvements that tend to increase the value of your property (for example, an assessment to build a new sidewalk). The cost of a property improvement is added to the basis of the property. However, a charge is deductible if it is used only to maintain an existing public facility in service (for example, a charge to repair an existing sidewalk, and any interest included in that charge).

If your mortgage payments include your real estate taxes, you can include only the amount the mortgage company actually paid to the taxing authority in 2018.

If you sold your home in 2018, any real estate tax charged to the buyer should be shown on your settlement statement and in box 6 of any Form 1099-S you received. This amount is considered a refund of real estate taxes. See Refunds and rebates, later. Any real estate taxes you paid at closing should be shown on your settlement statement.

For more information see the IRS Instructions for Schedule A, Line 5 State and Local Taxes.

Your deduction may be limited. See Reduction of Itemized Deductions for more information.