Property Tax Deductions: What Homeowners Can Write Off

One of the major financial benefits of homeownership is the ability to deduct property taxes from your federal income tax. However, changes to tax laws have placed limits on this deduction, and not every charge on your tax bill qualifies.

Itemizing vs. Standard Deduction

To claim a property tax deduction, you must itemize your deductions on Schedule A of IRS Form 1040. You cannot take the standard deduction and also deduct your property taxes.

Since the Tax Cuts and Jobs Act of 2017 nearly doubled the standard deduction, far fewer taxpayers itemize today. For the 2026 tax year, the standard deduction is over $15,000 for single filers and over $30,000 for married couples filing jointly. Unless your total itemized deductions (which include mortgage interest, state/local taxes, medical expenses, and charitable contributions) exceed your standard deduction amount, it doesn't make financial sense to itemize.

The SALT Cap Limit

Even if you do itemize, there is a hard ceiling on how much you can deduct. The deduction for State and Local Taxes (SALT) — which includes property taxes plus either state income taxes or state sales taxes — is capped at $10,000 per year ($5,000 if married filing separately).

If you pay $8,000 in property tax and $5,000 in state income tax, your total SALT is $13,000, but you can only deduct $10,000. This cap is a significant limitation for homeowners in high-tax states like New Jersey, New York, and California, where average property tax bills alone often exceed $10,000.

What Is Deductible?

According to the IRS, to be deductible, a property tax must meet two criteria:

• It must be based on the assessed value of the real property (ad valorem).
• It must be assessed uniformly throughout the community, and the proceeds must be used for general community or governmental purposes.

This covers the vast majority of your standard county, city, and school district property taxes.

What Is NOT Deductible?

Your property tax bill often includes fees and assessments that the IRS does not consider deductible property taxes. You must subtract these from your total bill before claiming the deduction:

• Special assessments for local benefits: If a tax is levied to pay for a specific improvement that benefits your specific property (e.g., a new sidewalk in front of your house, connecting your neighborhood to a new sewer line), it is not deductible.
• Itemized charges for services: Flat fees for specific services, such as trash collection, water, or recycling fees, are not deductible, even if they appear on your property tax bill.
• HOA dues: Homeowners Association fees are never deductible as property taxes.
• Transfer taxes: Taxes paid when you buy or sell a home (like stamp taxes or transfer taxes) are not deductible as property taxes (though they may adjust your cost basis).

Deducting Taxes Paid at Closing

If you bought or sold a home during the year, the property taxes are usually divided between the buyer and seller based on the number of days each owned the property. You can deduct the portion of the taxes allocated to you, regardless of who actually handed the check to the government. Check your closing settlement statement (HUD-1 or Closing Disclosure) to find the exact prorated amounts.

Escrow Accounts and Timing

If your property taxes are paid through a mortgage escrow account, you cannot deduct the amount you deposited into the escrow account during the year. You can only deduct the amount the lender actually paid to the taxing authority during the calendar year. Your lender will report this amount to you on Form 1098 at the end of the year.