Property Tax Deductions: An Overview

It is said that that the only certainties in life are death and taxes. Unfortunately, the actual tax amount paid is never certain. Often, those in the highest Federal tax bracket are required to pay up to 35% of taxable income. With these high rates, tax payers have to take advantage of each tax deduction at their disposal in order to relieve some of their tax burden.

For most tax payers who don’t own a business, run a farm, or have a trust or investment income, there are very few deductions that can be utilized. The majority of things that are deductible won’t amount to much for many of us because there is a minimum amount that must be met before it can be a worthwhile tax deduction. A common example of this is medical expenses. While these are technically deductible, the bills are required to exceed 9% of your income. So, unless your medical bills are substantial, they cannot be used.

On the brighter side, because of the government’s continued encouragement of home ownership, there are many viable tax deductions that can be utilized for those who own real estate. The most well known of these deductions are interest paid on a mortgage and the points paid on a new mortgage loan. (Visit http://www.republicpropertytax.com/index.php?nav=residential for more info).

One of the lesser known deductions is the property tax deduction. Many tax professionals tell us that money paid on other taxes is one of the most commonly sought after deductions. This is easy to comprehend because most people believe that it is not fair to be required to pay taxes on money that has already been used to pay other taxes. Fortunately, the tax code agrees with this.

Some taxpayers overlook this deduction because their taxes are paid through an escrow account by the bank. People forget that the escrow account is funded by their own money and not the bank. Therefore, taxes paid are deductible by the homeowner.

In order to deduct property taxes, be sure to fill in the correct amount on the IRS Form Schedule A, Line 6. If you feel your property valuation is too high, you can protest your property taxes in order to lower your property tax bill. If you pay through an escrow account, you can find the amount on the 1099-INT sent by the mortgage company. For those who pay directly to the government, it may be necessary to review your financial records. A point to remember is that some pay taxes twice a year, so don’t short change yourself by only deducting one payment. Before making any big decisions, we recommend that you visit with a tax consultant first (such as one of the experts at www.republicpropertytax.com).