Are Property Taxes Deductible?
So you have decided to sell your home and are currently negotiating seriously with some prospective homebuyers. One of these individuals that you are bargaining with seems to be very interested in purchasing your home but they have some questions regarding the technical details of property ownership. Even if you are selling your home and moving to a new home that you do not own, it will help you in the home selling process to have some understanding of the many issues that homeowners will have to face. This is particularly true if one of your prospective homebuyers will be a first time homebuyer.
Invariably, one of the first questions that you will have to answer will relate to property taxes. On the subject of property taxes, you will more than likely have to answer the question, "Are property taxes deductible?" A simple answer will be yes, however there are a variety of issues involved in the deductibility of property taxes.
What Are Property Taxes?
Property taxes are government levies that are based on the assessed market value of an individual's property. This assessed value is based on the analysis of your county assessor's office. Property taxes on all forms of real estate are fully deductible against current income taxes. This usually includes all levies applied by state and local governments. This also includes foreign taxes, such as those applied by school districts, on your property.
However, it is important to note that imposed local benefit taxes for property improvement that are applied by states and counties are not usually deductible. These taxes are used to assess streets, sidewalks, and sewer lines. These local benefit taxes are only deductible when they are used for: maintenance or repair, or interest charges related to those benefits. Additionally, taxes that are charged for you on issues related to property ownership such as homeowner's association fees; estate taxes; and service charges for water, sewer, or trash collection cannot be deducted.
