Can I Claim Property Taxes on My Personal & Business Deductions?

You may need to split your real estate tax write-off between business and personal use.

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Homeowners are entitled to several very advantageous tax deductions. If you own rental property, you can claim even more expenses on your tax return. The key is to put the correct deduction amount on the appropriate tax form. You can't write it off twice. The Internal Revenue Service doesn't look lightly on taxpayers who write off personal expenses as business ones.

Personal Residence

If you've got a mortgage, most likely your lender pays property taxes out of your escrow account and sends you an annual statement. If you pay property taxes directly, keep the bill and receipt of payment with your tax records. Report property tax paid on your personal residence on line 6 of Schedule A. You may only deduct the property tax which is based on the value of the property, and not any assessment for improvements such as sewers, paving or easements.

Rental Property

You can deduct any and all real estate or property taxes paid on your rental property. If you have a mortgage, the taxes will generally be paid out of escrow, and will appear on your 1098 for mortgage interest paid during the year. Otherwise, you'll pay your state or city directly. You can deduct both value-based and other assessments. Report the amount on Schedule E, line 16. Report a separate amount for each property you own.

Mixed-Use Property

If you own a duplex and live in half of it, split the property taxes between your personal and your rental unit, rather than writing the full amount off twice. Pro-rate the amount for a personal deduction by dividing the square footage of your residence by the total square footage. Report this amount on Schedule A and the remainder as rental-property taxes on Schedule E.

Office Property

If you run a business other than rental real estate, and must pay property or other real estate taxes for your office, report this as an expense for your business on line 23 of Schedule C, or your corporate tax return. Again, you may not expense any taxes levied for improvements or easements. If you claim business use of your home, divide up the property taxes between business and personal use, using the square footage calculations on Form 8829.

Partial-Year Usage

If you buy or sell property during the year, property taxes are divided between buyer and seller. You can only take a deduction for the number of days you owned the property. If you sold one property and acquired another, calculate the appropriate amount for each, and take the deduction on Schedule A, C or E, depending on the type of property.