are property taxes deductible

Are Property Taxes Deductible?

As the fiscal year comes to close, taxpayers start hunting for different types of provisions and enactments, with the help of which they can claim and avail a tax deduction. Home or property owners would be glad to know that they can deduct property taxes from their tax returns. Keep reading...

There are a considerable number of deductions that can be used while one files the income tax return. The income tax in the United States of America, is basically a federal tax that is collected by Internal Revenue Service. In addition to the federal tax that is collected by the IRS, there are a considerable number of state taxes, and also local taxes that are levied upon the taxpayers. In order to avoid double taxation, the IRS has granted all taxpayers a deduction that helps them to reduce the burden of double tax. Apart from the usual property tax deduction, there are also some important deductions that are included in the property tax deduction itemization. What is Property Tax? The first question that we need to ask ourselves is what is property tax? The answer is simple. Local and state governments have to spend a lot for providing people with different amenities and facilities such as public transport, infrastructure and educational facilities. Property tax is basically levied on the people who own properties, and these proceeds are then utilized by the government for welfare activities such as providing public amenities. As the property tax is collected and utilized by the state government, the IRS does not collect this tax. Here comes in the principle of tax deduction. The IRS taxes the income of people that has been earned by a person in one fiscal year. For example, if a person earns USD 1,000 in one year, the USD 1,000 is treated as his income. However, if he pays a property tax of say USD 100, then his 'taxable' income is reduced by USD 100. Thus, he has to pay his income tax on USD 900. Are Taxes on Property Deductible? The property that is to be taxed is first assessed by a tax assessor. The tax assessor fixes a particular value of the property which is then taxed. This tax is deducted from the taxable income when a person files the income tax return with the IRS. The taxable income can be deducted or rather reduced down with two basic options, namely the standard deductions and itemized deductions. The deductible taxes are a part of the tax deductions that are specified in Topic 503 of the IRS. The first itemized deduction for property tax, that must be considered by you is the property tax that has been paid to the state. You will need to mention its details when you file the income tax return. The second detail that you will need to consider is the home improvement of the property. According to IRS, home improvement is a type of addition to the book value of the property. Hence, the total amount of cost of renovation is a valid grounds for deductions. In cases where you have just sold off your property, and have incurred a loss, then you might also deduct the loss from the taxable income. However, you would get only a limit of USD 3000 in tax deduction in case of any loss in the sale of your property. But you can use the remaining loss as a capital loss carryover, and utilize it in the subsequent years. Depreciation is one deduction that you must never forget, while filing for a property tax deduction. Another question that I came across was 'when are property taxes deductible'. The answer is simple, a property tax deduction is an itemized tax deduction. Hence it can be availed only if you are filing for the itemized tax deductions. The property tax by state is sometimes collected more than once in a single year, however while claiming the deductions for income tax filing, all you need to do is total up the entire amount that you paid, and then claim it in your return. While filing for the income tax deductions and claiming for the property tax deductions, you will need to carefully review many IRS publications, because there are some very odd twists and turns when you claim the above mentioned deductions.

Похожие статьи