If you own a home, a commercial building or even a vacant lot, you’re required to pay property taxes. Your municipality conducts assessments on property to determine its value for taxation purposes. These fund are used to pay for local government employees’ salaries. Property taxes also fund firefighting and police services, maintenance of parks and recreation areas, street and traffic lights and road maintenance. One of the challenges that a homeowner faces is where to find enough space to store items accumulated over time, including various tax documents and property tax receipts. While you don’t want to discard them too soon, you may be wondering just how long you need to keep your property tax receipts.
Generally speaking, you should plan on keeping your property tax receipts as a verifiable proof of payment until you receive a copy of your next bill, at the very earliest.
How Long to Keep Property Tax Records
You’ll need to keep receipts for your property tax payments in case there is any question about whether they are up to date. At minimum, keep a property tax receipt or other records such as cancelled checks, online payment receipts, receipts with official stamp, until you receive a new statement or property tax bill indicating that the payment has been credited to your account. You
If you have a mortgage on your home, the lender will want to ensure that you keep the property taxes up to date. Sometimes the taxes payments are made through your mortgage lender. Hang onto your most recent property tax receipts in case you are asked by your lender to produce them. You will also need to provide proof that your property taxes are up to date if you decide to refinance your home with a different lender. The new lender will not be able to advance funds if the property tax payments are in arrears.
Property tax receipts also become important at income tax time. If you pay property taxes on your home, you can itemize deductions on your federal income tax return. According to the IRS, most taxpayers will benefit by itemizing them using Form 1040. Keep the receipts with your income tax returns for a minimum of three years. This is the minimum limitation period that you can amend an income tax return or that the IRS can audit you and determine that you owe more tax. If you file your taxes online, you should get an income tax receipt online showing what you paid and when you filed that you should retain with your return.
If you feel as though you’re being buried in tax records and property tax receipts, consider scanning the documents and storing them electronically. You’ll be able to retrieve them as needed without having to physically store paper records. For security reasons, you can copy the records to a flash drive and place it in a safety deposit box, where it will be safe from fire and other hazards until needed. For specific questions about how long you should keep copies of property tax receipts and other documents, consult a tax specialist for guidance.
Special Circumstances for Property Tax Receipts and Income Tax
There are some circumstances where you will need to keep your property tax receipts for income tax purposes longer than the standard time period recommended by the IRS. If you haven’t filed an income tax return for one or more years, keep property tax receipts indefinitely. The same recommendation applies if you have not been honest when filing your tax return.
2018 Tax Law Changes
While record retention rules aren't changing in 2018, rules around deducting state and local taxes are shifting, as are standard deduction levels. Taxpayers are only able to deduct state and local taxes up to a limit of $10,000. In the past, such deductions were unlimited.
Since the standard deduction is also rising to $12,000 for single taxpayers and $24,000 for married couples filing jointly, this will likely mean some taxpayers who only claimed state and local taxes as a deduction will no longer need to claim property taxes on their federal income taxes. In that case, they may not need to hold on to property tax receipts as long.
Tax Law in 2017
In 2017, the state and local tax deduction has no cap. Additionally, the standard deduction is lower, meaning more homeowners will likely want to hold on to that property tax receipt to claim the federal tax deduction.
- IRS: Form 1040
- IRS: How Long Should I Keep Forms
- Forbes: New: IRS Announces 2018 Tax Rates, Standard Deductions, Exemption Amounts And More
- CNN: Making Sense of the New Cap on State Tax Deductions
- Internal Revenue Service (IRS). "Publication 530 (2018), Tax Information for Homeowners." Accessed Jan. 14, 2020.
- Internal Revenue Service (IRS). "Topic No. 503 Deductible Taxes." Accessed Jan. 14, 2020.
- Internal Revenue Service. "IRS Provides Tax Inflation Adjustments for Tax Year 2019." Accessed Jan. 14, 2020.
- Internal Revenue Service (IRS). "Topic No. 556 Alternative Minimum Tax." Accessed Jan. 14, 2020.
- Internal Revenue Service. "IRS Advisory: Prepaid Real Property Taxes May Be Deductible in 2017 If Assessed and Paid in 2017." Accessed Jan. 14, 2020.
Jodee Redmond is a freelance writer, blogger and editor who has been working full-time for over 15 years. She is a graduate of Centennial College and has worked as a tax consultant and a legal assistant. Her previous experience and boundless curiosity is a distinct advantage when writing about such varied topics as income tax, insurance, commercial property, business, construction, addiction, freelance writing and more.