Are Property Taxes Deductible in Subsequent Years?

In any year you pay property taxes due on your home, you can usually deduct them. If your taxes are due this year and you pay on time, you write them off. If you screw up and don't pay until next year, they're still deductible, but on next year's tax bill.

Tax Reason

There are two primary types of property tax and only one is a write-off. When local government slaps you with a tax based on the value of your property, you can claim a deduction. If it's a special assessment to pay for local benefits -- new lights or a new sidewalk on your street, say -- it's not deductible, as you're getting something in return. An assessment for maintenance or repairs to the local infrastructure, however, would be a legit write-off.

Claiming

To deduct property taxes, you have to itemize; if you take the standard deduction, there's no write-off. If you do itemize, you report the total deductible property taxes on Schedule A. If your local tax bill doesn't identify whether any of the tax was a special assessment, your county officials can. Keep track of special-assessment costs: when you sell the house, you can include them in the basis. You subtract the basis from the sales price to figure any taxable gain, so the bigger the basis, the better.

Special Cases

When you buy your home, you can agree to pay the seller's back property taxes, if he has any, as part of the purchase price. There's no deduction for this, though -- tax-wise it's just part of the home's basis, not a separate tax. If your you pay your property taxes into an escrow account, it's always possible that the amount you pay into the account may be more or less than the tax bill. You deduct the tax the lender paid local government, not the amount paid into the account.

No Deduction

If your state charges any sort of a transfer tax or stamp tax on the sale of real estate, that fee isn't deductible. Neither are the other local fees that may come with home ownership, such as your city's charge for picking up your trash or providing you with water. Transfer taxes count as part of your basis when you sell your home. The other fees are just an expense you don't get to deduct.

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About the Author

A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.

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