IRS Guidelines for Property Tax Deduction

by Craig Woodman ; Updated July 27, 2017

The Internal Revenue Service allows homeowners to deduct their real estate property taxes from their income. Property taxes are deducted on IRS Schedule A, Itemized Deductions, and are a below-the-line deduction from your adjusted gross income. There are different considerations in claiming property taxes, depending on the form of ownership, and some tax-like fees can not be deducted.

General Guidelines

Internal Revenue Service guidelines allow you to deduct real estate taxes based on the assessed value of the property. Your local taxing jurisdiction must also tax all of the other residential real estate within their boundaries at the same rate. Deductible taxes must also pay for services that benefit the community in general, and not for services that are specifically provided to you for your benefit.

Division of Taxes - New Purchase

When you first purchase a home, the IRS considers you to be the owner on the date that you close on the purchase. The taxes must be pro-rated by the amount of time that the seller owned the home, and the time that you have owned the home during the tax year. Deductibility is completely independent of who actually paid the taxes. Most real estate settlement forms split the taxes so that each party pays what they are responsible for, so the amount you pay in taxes according to that statement is usually the deductible amount.

Non-Deductible Expenses

Certain fees you pay in the course of home ownership may not be deductible as real estate taxes. Any fees you pay for delivery of services, such as water or trash removal charges, is not deductible as real estate taxes. Any assessments for work that improves the value of your home are not deductible. This includes street or sidewalk construction, as these must be added to the taxable basis for your property. Homeowner's association assessments are not deductible, as they are not paid to a state or local governing authority.

Cooperative Home Ownership

If you own a cooperative home, you really own stock in a company that owns an apartment building or other type of housing unit. The taxes paid by the corporation are deductible by the people who live in the building with some guidelines. Owning stock in the cooperative must give you the right to live in a housing unit for the real estate taxes to be deductible, plus at least 80 percent of the corporation's income must come from tenant-shareholders. If you meet the IRS tests, you may deduct a percentage of the property taxes proportionate to the percentage of stock you own.

About the Author

Craig Woodman began writing professionally in 2007. Woodman's articles have been published in "Professional Distributor" magazine and in various online publications. He has written extensively on automotive issues, business, personal finance and recreational vehicles. Woodman is pursuing a Bachelor of Science in finance through online education.