How to Break Out the Property Taxes Between a Rental Property & Primary Residence

You can deduct property taxes even before the tenant moves in.

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You can write off property tax on your home and a rental house, but not in the same way. Property tax on your residence is only deductible if you itemize on Schedule A. Taxes on a rental property are a business expense, deductible on Schedule E or Schedule C.


If you own two houses, one a rental, it's no problem to break down the taxes and report them on separate tax schedules. The tricky part comes when you have mixed-use -- a rental house you convert to personal use or vice versa, or a residence with a basement apartment you rent out. If, say, the apartment takes up 11 percent of your home's square footage, you can write off 11 percent of the property tax on your house as a business expense.


Suppose you move to another city and rather than sell, you turn your former home into a rental. If it's ready for rental April 1, you can deduct three-quarters of the property taxes for the year as a rental expense. The first quarter -- the first three months of the year, while it was still your personal residence -- is only deductible through itemizing. The same rule applies in reverse if you move into a former rental. Even if you don't have a tenant living there, you can claim the tax as a business deduction for any period the property is ready for rent.

Occasional Use

The same principle of dividing property taxes applies if you have, say, a vacation home you rent out for most of the year. Suppose you or your family only live there a tenth of the year, you can write off 90 percent of the property taxes and other expenses. If you let a family member or friend use it but charge full market-rate rent, that counts as a part of the rental period too.

What to Leave Out

If you pay property taxes into an escrow account, you don't deduct all of your payments -- you deduct only that portion that was actually used to pay the taxes. What's more, some portions of your property tax bill aren't deductible. Taxes based strictly on the value of your property are always a valid write-off on a house. Local governments also charge special assessments on property owners to pay for street lights, sidewalks, drainage and other projects. You can't write off these taxes, because you get a benefit in the increased value of your property.