How Much of Your Property Taxes Are Tax Deductible? A Clear Guide

Who This Is For:

• Homeowners wanting to understand which property taxes are deductible

• First-time homeowners preparing for their first tax season

• Business owners with home offices or mixed-use properties

• Homeowners in high-tax states who may be affected by the SALT cap

• Individuals looking for clearer tax planning and recordkeeping guidance

Key Takeaways:

• Property taxes are deductible only when you itemize, not when you take the standard deduction.

• The SALT cap limits state and local tax deductions to $10,000 ($5,000 if married filing separately).

• You can deduct only value-based real property taxes; fees like HOA dues, water, and trash aren’t deductible.

• The most property tax you can deduct is the portion that fits under the combined SALT limit with other taxes.

• Mortgage interest, mortgage insurance premiums, and certain home equity loan interest may also be deductible.

• Home-based business owners can split property taxes between personal and business use.

What Homeowners Should Know About Property Tax Deductions

If you own a home, the IRS lets you take a property tax deduction when you itemize deductions on your tax return. For many homeowners, this can lower their overall taxes and reduce taxable income, but only if they understand the rules.

The biggest reason for confusion is the state and local taxes (SALT) cap, which limits how much you can deduct. Another common stumbling block is how property taxes are paid, especially when they flow through an escrow account. Many people assume the full amount is deductible without checking the breakdown on the tax bill.

Let's explore what homeowners like you should know about property tax deductions: what counts, what doesn’t, and how to figure out the tax deduction you’re allowed to claim. By the end, you’ll understand how to calculate the amount that actually helps you during tax season and how to keep the right records.

How Property Taxes Work

Property taxes exist so your local government can pay for schools, public safety, water and sewer systems, parks, and other local benefits. When you pay real estate taxes, you’re helping fund your community.

Your taxable value is often based on your home's assessed value, which may differ from its fair market value. The taxing authority sets rates and calculates how much you owe based on that figure.

You can make property tax payments by directly paying the county or city, sending money through your mortgage lender, who collects monthly payments, or funding an escrow account, where the lender pays the bill for you. Whichever method applies, keep copies of your property taxes paid. You’ll need them for your tax return and to verify the exact amount the taxing authority received.

Are Property Taxes Deductible?

Yes, the IRS does allow you to deduct property taxes as part of itemized deductions. Here’s what counts:

Deductible taxes

• Real property taxes based only on your home’s assessed value

• Local real estate taxes itemized on your tax bill

• Personal property taxes that are value-based, such as some vehicle taxes

• Certain local income taxes or state and local taxes, depending on your choice of deduction

Not deductible

• Trash collection charges

• Homeowners association fees or homeowners association assessments

• Water and sewer fees

• Transfer taxes when buying a home

If anything on your bill seems unclear, you can call your local taxing authority to confirm how the line items are classified.

The SALT Cap: How Much Property Tax You Can Actually Deduct

Even if your real property taxes qualify, you can only deduct up to the SALT cap, which limits state and local deductions to $10,000 for most filing statuses or $5,000 if you’re married filing separately. This cap includes property taxes, state and local income taxes, and sales taxes (if you choose to deduct those instead of income taxes)

The most property tax you can deduct is only the portion that fits under the $10,000 combined limit after adding all your other state and local taxes. For example, if you paid $6,500 in state and local income taxes and $7,000 in property taxes, you can deduct just $10,000 rather than the full $13,500. Because this cap affects your total itemized deductions, it’s worth adding everything up before deciding whether itemizing actually benefits you.

Standard Deduction vs. Itemizing: How to Decide

Many people don’t benefit from itemizing because the standard deduction is relatively high. Whether you should itemize your deductions depends on how your qualified expenses add up, including your property, mortgage interest, and any other tax deductions you’re eligible for. If your property taxes are low or you have minimal deductible expenses, the standard deduction may offer more savings.

Business owners often mix personal and business expenses, or they may qualify for the home office deduction. Sorting these correctly affects whether itemizing makes sense. Steady helps clients structure their records so the tax picture is clear and compliant.

Related Deductions Homeowners Often Ask About

Homeowners tend to pair questions about property taxes with other write-offs.

Common deductions include:

• Mortgage interest and the mortgage interest deduction

• Mortgage insurance premiums

• Home equity loan interest if the loan was used to improve the home

• Home equity loan rules vary, so documentation matters

• Points paid or mortgage points at purchase

• Interest paid listed on your mortgage statement

Not deductible:

• Homeowners association assessments

• Homeowners association fees

These categories impact your taxable income and overall tax planning, so look at them together.

Situations Where Property Taxes Are 100% Deductible (and When They’re Not)

You can deduct the full amount of your property tax payments only when the total fits within the SALT limit. In many areas, homeowners stay under $10,000, so the deduction is fully allowed.

You may face limits when:

• You live in a high-tax state

• You own multiple properties

• You’re married, filing separately

• Your bill includes charges that aren’t deductible

For example, if your deductible real property taxes total $4,200 and your state and local income taxes total $3,000, you can deduct the full amount. But if those values are $8,000 and $7,000, the SALT cap restricts you to $10,000.

Check your escrow records to confirm the exact amount the lender paid, because not every line item includes property taxes that qualify.

Special Considerations for Home-Based Businesses and Rentals

If part of your home qualifies for the home office deduction, you can allocate actual expenses, such as property taxes, between personal and business use. The personal portion may be an itemized deduction; the business portion is a direct operating expense.

This helps reduce taxable income, especially in industries where a home-based workspace is common, such as content creation, contracting, home services, and property management.

Homeowners may also qualify for residential energy credits, such as those for solar panels, which offer additional tax benefits beyond property taxes.

Steady works with business owners across these industries to help classify expenses correctly, avoid mistakes, and build a year-round tax strategy.

Estate Tax and Long-Term Planning Considerations

The property tax deduction doesn’t reduce estate tax directly, but well-organized records make planning smoother. Understanding the taxable value of property, along with annual deduction choices, helps shape long-term decisions.

If you have multiple homes, rental units, or other sizable assets, a tax professional can help you align your annual taxes with broader goals. These decisions often span more than one tax year, so planning ahead matters.

Make Property Taxes Work for You

Understanding how much of your property taxes you can deduct helps you lower your tax bill and plan ahead with confidence. Review your tax bill, check which items qualify, and calculate whether itemizing beats the standard deduction. Each piece influences your overall financial picture.

If you want help organizing records or building a tax strategy that fits your goals, Steady is here to support you. Schedule a call today to start planning with professionals who understand both the details and the bigger picture.