Claiming Property Taxes On Your Tax Return: What You Need To Know
December 21, 2025 10
Key Takeaways:
- Deduction Basics: Not all property taxes qualify for deduction. Only taxes based on assessed value and levied by local governments are eligible.
- SALT Cap Impact: The $10,000 federal limit on state and local tax deductions affects how much property tax you can write off each year.
- Savings Strategy: Reducing your tax bill through protests or exemptions can lower what you owe and potentially increase your long-term financial savings.
Property taxes are a major annual expense for homeowners, especially in Texas where rates are among the highest in the country. While many people are aware that property taxes might be deductible, fewer understand exactly how those deductions work or how to take full advantage of them. Questions around eligibility, deduction limits, and how to file correctly often leave taxpayers unsure if they’re getting the savings they deserve. If you’re paying thousands in property taxes each year, it’s worth knowing what part of that amount could reduce your federal tax bill.
At Property Tax Solutions, we’ve helped thousands of Texans reduce their property tax burden by challenging overassessed home values and identifying real opportunities for savings. We’ve been doing this since 2010 using accurate data, local market knowledge, and a clear process built to deliver results. We don’t just review values, we fight for our clients’ best interests with every protest we file.
A Brief Overview: Deducting Property Taxes
Property taxes are recurring charges levied by local governments to support essential services like public schools, road maintenance, and emergency response systems. As a property owner, you likely pay these taxes either directly to your county’s tax office or through an escrow account set up by your mortgage lender.
What many homeowners don’t always realize is that these payments may offer some relief during tax season. Under the federal tax code, certain property taxes can be deducted when you file your income tax return, provided you meet a few eligibility requirements. While this deduction won’t eliminate your tax bill entirely, it can help reduce your taxable income, potentially lowering the amount you owe to the IRS.
Understanding how property tax deductions work is particularly important in states like Texas, where property taxes tend to be higher than the national average. Whether you own a home in Austin, Dallas, or anywhere in between, knowing what qualifies and what doesn’t, can make a real difference when you file.
Tax Deductions For Property Taxes
Knowing which property taxes qualify as deductions can make a significant difference in your tax planning. While some property-related costs can help reduce your taxable income, others don’t meet IRS guidelines. Below is a breakdown of what is and isn’t considered deductible when it comes to your property tax bill:
What Property Taxes Are Deductible?
You can deduct real estate taxes if they are based on the assessed value of your property, imposed by a state or local government, and used to fund services that benefit the general public. This typically includes taxes paid on your primary home, vacation property, or even undeveloped land. If your taxes are paid through an escrow account as part of your mortgage, your lender will usually issue a Form 1098 that shows the total amount paid during the year.
Non-Deductible Property Charges
Some charges listed on your property tax statement might seem deductible but aren’t recognized by the IRS. Fees for trash pickup, water service, or sewer maintenance are considered utility fees rather than taxes and don’t qualify. Similarly, if your local government imposes a special assessment for improvements like new sidewalks or streetlights, these are seen as direct property enhancements and are not eligible for deduction.
SALT Deduction Limits
The State and Local Tax (SALT) deduction limit significantly affects how much you can write off. Since 2018, the IRS has capped the combined deduction for property taxes, state income taxes, and local sales taxes at $10,000 for single filers and married couples filing jointly. For married individuals filing separately, the cap is $5,000. This limitation is especially relevant for property owners in high-tax regions or those with multiple properties, where itemized deductions might not exceed the standard deduction.
How To Claim Property Taxes On Your Tax Return
Claiming your property taxes correctly on your tax return can help you reduce your taxable income, but there are a few specific steps you need to follow. This process only applies if you choose to itemize your deductions instead of taking the standard deduction. Here’s how to make sure your property tax deduction is properly claimed:
Step 1: Confirm Your Eligibility
Before anything else, determine whether itemizing makes financial sense for your situation. You can only deduct property taxes if you itemize deductions on Schedule A of your IRS Form 1040. Generally, itemizing is worthwhile when your total allowable deductions exceed the standard deduction for your filing status.
Step 2: Gather The Right Documentation
Accurate records are key to claiming your deduction. If you have a mortgage, your lender will typically send you Form 1098, which shows the amount of property tax paid from your escrow account. If you pay your taxes directly, keep copies of receipts or statements from your local taxing authority that show the exact amounts and payment dates.
Step 3: Fill Out Schedule A
Once you’ve gathered your documentation, you’ll report your deductible property tax payments on Schedule A. Enter the full amount of eligible property taxes paid during the year in the appropriate section. Make sure the total reflects only the allowable taxes and excludes any non-deductible charges.
Step 4: Submit Your Return
After completing Schedule A, attach it to your Form 1040 and file your federal tax return. It’s important to double-check your entries for accuracy. Errors can lead to delays in processing or, in some cases, trigger a review by the IRS.
Maximizing Your Savings With Property Tax Exemptions
Before you claim a deduction for your property taxes on your federal return, it’s worth checking whether you qualify for any local property tax exemptions. These exemptions can reduce the taxable value of your property, which directly lowers the total amount of property tax you owe. In turn, this may affect how much you’re eligible to deduct on your federal taxes.
Common Property Tax Exemptions
One of the most widely available exemptions is the homestead exemption, which applies to a homeowner’s primary residence. This exemption lowers the appraised value of your home for property tax purposes and is available in most Texas counties. Other common exemptions include those for homeowners who are age 65 or older, individuals with qualifying disabilities, and veterans with service-related disabilities.
How Exemptions Affect Your Deduction
By reducing your total property tax bill, these exemptions can indirectly impact your deduction amount on your federal return. Although the IRS only allows you to deduct what you actually paid in property taxes, lowering your tax liability at the local level means you’ll have less to pay in the first place. This reduces your out-of-pocket costs and supports better long-term financial planning.
Applying For Exemptions
To take advantage of these exemptions, you must file an application with your local appraisal district. This process typically requires proof of residency or eligibility, such as a utility bill, age verification, or documentation of a disability rating. Once approved, the exemption will apply to future tax years, but in many areas, you only need to apply once unless your status changes.
The Role Of Property Tax Solutions
Understanding the rules around deducting property taxes is important, but reducing your property tax bill in the first place can have an even greater impact. This is where services like Property Tax Solutions come in. By challenging the assessed value of your property, you may be able to lower the amount you owe, which in turn affects the deduction you claim on your federal tax return.
How Property Tax Protest Services Help
Property tax protest services review the valuation placed on your property by the local appraisal district. If the assessed value is found to be too high, they will prepare and file a formal protest on your behalf. This process can lead to a reduction in your property’s assessed value, which lowers your annual tax bill.
Why It Matters For Your Tax Return
Since the IRS only allows you to deduct property taxes you’ve actually paid, securing a lower bill through a successful protest means less money going out and better control over your annual finances. While the deduction on your federal return is capped, any savings at the local level still leave more money in your pocket. This is particularly useful in Texas, where property tax rates are relatively high and small valuation changes can lead to meaningful savings.
Expertise That Supports Results
A team that understands Texas tax laws and the local appraisal process can guide you through every step, from initial review to hearings. With a data-driven approach and local market insight, services like Property Tax Solutions can help you challenge unfair assessments and manage your property tax burden more effectively.
Final Thoughts
Understanding how much of your property taxes are tax deductible can make a noticeable difference during tax season. While federal deductions can reduce your taxable income, taking proactive steps to lower your property tax bill through exemptions or protests can have a longer-term financial benefit. Both strategies work together to help you keep more of what you earn.
For Texas homeowners, especially those in areas with rising valuations, keeping property taxes in check is about more than just appealing once. It requires ongoing attention to your property’s assessed value and an understanding of which tax rules apply to your situation each year. By knowing what qualifies as deductible and exploring options like the homestead exemption or a formal protest, you can build a smarter approach to managing your tax burden.
If you’re unsure whether your property is over-assessed or simply want to see how much you could be saving, you can get a quick estimate through this property tax savings check. It’s a simple way to explore potential savings and take a more active role in your property tax strategy.
Frequently Asked Questions About Claiming Property Taxes on Your Tax Return
Can I deduct property taxes if I pay them late?
Yes, you can still deduct property taxes paid late as long as the payment was made within the tax year you’re filing for. The IRS considers the date of payment, not when the taxes were due.
Are property taxes on rental properties deductible?
Yes, property taxes on rental properties are considered an operating expense and are fully deductible as part of your rental income reporting on Schedule E.
Can I deduct prepaid property taxes?
Prepaid property taxes are generally not deductible until the year they apply to. If you pay in advance for future tax years, you must wait to deduct them until those years arrive.
Are there deductions for property taxes on inherited property?
Yes, if you inherit a property and continue paying property taxes on it, you may deduct those taxes if you itemize deductions and meet eligibility rules.
Do property tax refunds need to be reported?
If you received a property tax refund from a previous year and itemized deductions during that year, you may need to report that refund as income on your current return.
Can I deduct property taxes paid in another country?
Property taxes paid to a foreign government on real estate you own abroad may be deductible if they meet the same standards used for domestic property tax deductions.
Does refinancing affect my property tax deduction?
Refinancing does not change your eligibility to deduct property taxes. However, if you switch lenders, be sure to track which mortgage company pays your taxes through escrow.
Can I deduct property taxes on land I own but do not use?
Yes, if the land is not generating income and you’re not using it for business, you may still be able to deduct the property taxes as long as you itemize deductions.
Are mobile home property taxes deductible?
Yes, if the mobile home is considered real property and the taxes meet IRS criteria, they can be deducted like any other qualifying property taxes.
If I live in a condo, can I deduct the property taxes included in my HOA fees?
Only the portion of your HOA fees that directly covers real estate taxes may be deductible. You’ll need documentation or a statement from the HOA specifying this amount.