USA – You may want to avoid paying too much on property taxes. To do this, you should deduct your property taxes via itemization. With this method you can write off real estate taxes using the IRS Schedule A form 1040. If you want to save money on your tax bill, the best way is to deduct property taxes. We give you a simple, easy-to-understand guide for writing off your property taxes, a checklist for real estate tax deductions and more! This is critical information for real estate investment finances!
How to Deduct Property Taxes – Save Money on Tax Bill
It is possible to deduct your property taxes! That’s because the government wants to encourage homeowners, and support them financially. Therefore, we have created this easy to use guide to show you the best ways to deduct property taxes, and pay less in taxes from your paycheck! Property taxes, along with mortgage tax, and real estate transfer tax, is also one of the three taxes when buying a house!
Property Tax Basics – Meaning, Definition
Property tax is often confused as being a tax on real estate property. Yet this is a misconception. The largest proportion of property taxes come from real estate, because this is the most expensive property most people own. Yet property taxes can also be levied on airplanes, computers, furniture, etc. In short, it is a tax on owning very expensive things. These are for most people real estate, which is why property taxes are also often called real estate taxes. New York property taxes are among the highest in the country!
The USA has a property tax rate of on average 1.11%, which are paid once a year on April 15th. To learn more, read our easy-to-understand guide:
Write Off Property Taxes – Steps, Easy Guide
To write off property taxes you need to follow specific steps and meet certain criteria. These are not difficult though, and with minimal effort, you can also save a lot of money writing off your property taxes! Depending on how you pay your property taxes the steps can differ. Some people pay it semi-annually, while others use a monthly payment to an escrow account. Escrow accounts are also typically used as part of the additional closing costs when buying a house!
Criteria for Deducting Property Taxes – Types of Property
There are many types of real estate, and not all are eligible to deduct off your tax bill. What you can deduct are importantly taxes you have already paid. That means you cannot deduct taxes that are still outstanding. You also cannot deduct property taxes on assessments for various types of property. What is deductible are your home (whether primary residence or vacation home), property even outside of the country, Cars, RVs, boats, etc., land, and even co-op apartments.
- Home (Residence or Vacation)
- Property outside USA
- Cars, RVs, Boats, etc.
- Co-Op Apartments
How much Property Tax can you Deduct? Maximum Amount
You can deduct a maximum of $10.000 a year. This is then a combination of state, federal and local income taxes. This makes sense, considering New York property taxes are vastly different from Florida property taxes for example. Also, if you are married and filing seperately, this is reduced to $5.000 per person.
- Up to $10.000 a year – Filing as Single
- Up to $5.000 a year – Married filing seperately
Steps for Writing off Property Taxes – Guide, Checklist
These are the main steps to write off your property taxes. Importantly, you deduct your real estate taxes with the schedule A form from the IRS. First, you get a record of your tax bill, this is so that you know exactly what you are paying. Next, use the schedule A of the IRS form 1040 for itemized deduction from the IRS to file your deduction. One last thing is important, you can only deduct your property taxes in the year that you pay them! Meaning that if you pay a bit earlier, you can still deduct it from this year!
- Get a record of your tax bill
- Use Schedule A of Form 1040 from the IRS
- Deduct property taxes in the year that you paid them!
Real Estate Tax Deductions
The federal government has many ways to make it easier to pay less in taxes on real estate. There are three taxes when buying real estate, and all three can be minimized! There are more ways that you could be paying less for your taxes now! Of course you’ve heard of founding a real estate LLC, or manipulating your capital gains taxes, but there’s much more to learn! Make sure to read up on how you can take advantage of