If you own residential real estate, you can take a deduction for the state and local taxes you paid on the property. If you bought or sold a home you can also deduct real estate taxes you paid during closing or settlement of the sale or taxes that you paid directly to a taxing authority.
As a result of the Tax Cuts and Jobs Act of 2017 (2017 tax reform): the Schedule A deduction for state and local taxes paid, including real estate taxes, is limited to $10,000 (or $5,000 if you are married filing separately).
Your situation must meet certain requirements for you to be able to deduct real estate taxes on your home, second home, or other real estate not used for business, including:
- The tax must be assessed uniformly at a similar rate on all the real property throughout the community levying the tax.
- The tax proceeds must be used for general community or governmental purposes.
- You paid the tax either at settlement or when you closed on the property, or during the year to the taxing authority.
Payments for the following items generally aren’t deductible as real estate taxes:
- Taxes for local benefits or improvements that increase the value of your property.
- Itemized charges for services (such as trash and garbage pickup fees).
- Transfer taxes (or stamp taxes).
- Rent increases due to higher real estate taxes.
- Homeowners' association charges.
What about rental properties?
You can also deduct state and local property taxes you paid on rental real estate. However, the deduction limit of $10,000 for state and local taxes does not apply to property taxes on rental property. The taxes you paid on your rental property are usually reported on Schedule E of your return.